The single biggest misunderstanding US founders have about contractor compliance is that there is one classification test. There is not. There is one federal test (IRS common law) and there are 50 state tests. Many states have multiple tests inside their own borders, depending on whether you are asking about unemployment insurance, wage-hour, workers compensation, or income tax.
This guide is a map of the state rules. For each state we cover, we cite the underlying statute or labor department guidance. Where a specific state’s rule cannot be verified from a primary source, we leave it out rather than guess.
For the federal layer, see our IRS worker classification guide. For California specifically, see our AB5 deep dive.
The three flavors of classification test
Across the US, almost every state uses one of three approaches.
The ABC test. A three-prong test. The worker is an employee unless the hirer proves all three prongs. Prongs are typically: (A) freedom from control, (B) outside the usual course of the hirer’s business, and (C) customarily engaged in an independently established trade. ABC is the strictest test for contractor status.
The common law right-to-control test. A multi-factor balancing test focused on whether the hirer has the right to control the work. The IRS test is in this family. The Restatement (Second) of Agency factors are also in this family. Easier to satisfy than ABC.
Modified or hybrid tests. Some states use ABC but drop one prong (often B). Some use ABC only for unemployment insurance but common law for other purposes. Some have their own statutory factor list.
Strict ABC states (broad application)
These states apply the ABC test broadly across wage-hour, unemployment, and often other labor laws.
California
ABC test codified at Labor Code section 2775. The test came from Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, was codified by AB5 in 2019, and recodified by AB2257 in 2020 into sections 2775 through 2787. Exemptions exist for specific professions (lawyers, physicians, accountants, licensed real estate agents) and for qualifying B2B relationships under section 2776. Read the statute at leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=2775.
Application: Labor Code, Unemployment Insurance Code, and wage orders.
Massachusetts
ABC test codified at General Laws Chapter 149, Section 148B. The test reads:
An individual performing any service… shall be considered to be an employee unless: (1) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and (2) the service is performed outside the usual course of the business of the employer; and, (3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.
Read the statute at malegislature.gov/Laws/GeneralLaws/PartI/TitleXXI/Chapter149/Section148b. Massachusetts has applied the ABC test since 2004 in this form. Application: independent contractor statute (which covers wage and overtime law), unemployment insurance.
The Supreme Judicial Court has held that the ABC test in Section 148B applies to franchise relationships, which makes Massachusetts one of the toughest jurisdictions for franchisors. Penalties for misclassification can include treble damages on unpaid wages and attorney’s fees.
New Jersey
ABC test codified at N.J.S.A. 43:21-19(i)(6)(A)(B)(C) for unemployment compensation, and used by the courts in wage payment and wage-and-hour cases as well. Read the statute at law.justia.com/codes/new-jersey/title-43 and see the Department of Labor’s independent contractor guidance.
NJDOL adopted final ABC test regulations in May 2026, effective October 1, 2026, which clarify how the three prongs are evaluated. The regulations make clear that labels (Form 1099, “independent contractor agreement”) do not control if the facts of the relationship show otherwise. Application: unemployment insurance, wage and hour, wage payment, prevailing wage.
Connecticut
ABC test codified at Connecticut General Statutes section 31-222(a)(1)(B)(ii) for unemployment, and applied by Connecticut courts in wage-and-hour cases. Read the statute at law.justia.com/codes/connecticut/title-31/chapter-567/section-31-222/ and Connecticut Department of Labor guidance.
The Connecticut Supreme Court interprets prong C broadly. The worker does not need to actually have other clients at the moment, but must be capable of engaging in an independent business. Application: unemployment compensation, wage payment law.
Vermont
ABC test codified at 21 V.S.A. section 1301(6)(B) for unemployment compensation. Read the statute at legislature.vermont.gov/statutes/section/21/017/01301.
Per Vermont DOL guidance, failure to properly classify a worker can produce a penalty of up to $5,000 per improperly classified worker. Application: unemployment insurance, workers compensation (under 21 V.S.A. section 601 with its own factor test that aligns with ABC).
Illinois (construction)
ABC test codified at 820 ILCS 185 (the Employee Classification Act) for the construction industry. Read the act at ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2898 and Department of Labor guidance.
The Illinois Employee Classification Act applies only to construction. For non-construction work, Illinois uses the common law right-to-control test under the Wage Payment and Collection Act and the Unemployment Insurance Act. Application: construction industry classification, with reporting requirements for payments to non-employee workers.
ABC for unemployment only
Many states use an ABC test only in their unemployment insurance statute, and use a different test for other purposes.
Washington
ABC-like test codified at RCW 50.04.140 for unemployment insurance. Read the statute at apps.leg.wa.gov/RCW/default.aspx?cite=50.04.140.
The Washington statute has six tests, and the employer must satisfy all six (or alternatively all of a different combination) for the worker to be excluded from employment. The first three are essentially ABC. The remaining requirements add documentation requirements (filing a Schedule C, having a UBI number, advertising). Washington’s test is notably strict. Application: unemployment insurance. For workers compensation, RCW 51.08.180 uses a different test.
Alaska
ABC test under Alaska Statute 23.20.525(a)(8) for unemployment insurance. The Alaska Department of Labor publishes guidance on the three-part test.
Delaware
ABC test at 19 Del. C. section 3302(10)(K) for unemployment.
Hawaii
ABC test at HRS section 383-6 for unemployment.
Indiana
ABC test at IC 22-4-8-1(b) for unemployment.
Maryland
ABC test at Md. Code Lab. and Empl. section 8-205 for unemployment, with additional requirements for the Workplace Fraud Act in construction and landscaping.
Nebraska
ABC test for unemployment under Nebraska Revised Statute 48-604.
Nevada
ABC test at NRS 612.085 for unemployment.
New Hampshire
ABC test at RSA 282-A:9(III) for unemployment.
New Mexico
ABC test for unemployment under NMSA 51-1-42(F).
Tennessee
ABC test for unemployment under Tenn. Code section 50-7-207(e).
Utah
ABC test for unemployment under Utah Code section 35A-4-204(3).
West Virginia
ABC test for unemployment under W. Va. Code section 21A-1A-16.
For all of the above, the typical pattern is that the state uses ABC only for unemployment insurance purposes. For wage-and-hour, workers compensation, and other labor laws, the state often uses a common law right-to-control test or an “economic realities” test. A worker can therefore be a contractor for wage-hour purposes and an employee for unemployment purposes within the same state.
Modified ABC (AC only, no B prong)
A handful of states use a two-prong A-and-C test, dropping prong B. Without prong B, the worker can perform services within the hiring entity’s usual course of business and still qualify as a contractor.
Colorado
Modified test at Colorado Revised Statutes section 8-70-115 for unemployment. The Colorado test has nine specific factors that an employer can use to demonstrate the worker is engaged in an independent business. Read at law.justia.com/codes/colorado/title-8/employment-security-act/article-70/section-8-70-115/.
Pennsylvania
Modified test for unemployment under 43 P.S. section 753(l)(2)(B). Pennsylvania also has the Construction Workplace Misclassification Act (Act 72 of 2010) with stricter rules for construction.
Wisconsin
Modified test at Wis. Stat. section 108.02(12) for unemployment, with nine factors a worker must satisfy.
Wyoming
Modified test under Wyoming Statutes section 27-3-104.
Idaho
Modified test at Idaho Code section 72-1316(4) for unemployment.
Montana
Modified test under Mont. Code Ann. section 39-71-417 for workers comp, with additional rules under the Department of Labor and Industry.
Common law right-to-control states
These states use a multi-factor right-to-control test similar to the IRS approach. The exact factor list varies, but no state in this group requires the strict three-prong showing of ABC.
Texas
Common law test under Texas Labor Code section 201.041 for unemployment. The Texas Workforce Commission has adopted a 20-factor test adapted from the old IRS list. Read the TWC guidance and the statute at statutes.capitol.texas.gov/docs/la/htm/la.201.htm.
Texas is one of the most contractor-friendly states. The common law test, combined with a 20-factor balancing approach, gives employers more room than in ABC states. Application: unemployment, Payday Law, workers compensation (with a separate statutory test).
New York
Common law right-to-control test for most purposes. Read the New York Department of Labor guidance on independent contractors. The test asks who has the right to control the work, with factors including how the worker is paid, who provides equipment, the duration of the relationship, and whether the work is part of the hirer’s regular business.
New York has special statutory ABC-like tests for the construction industry under Labor Law section 861-c, and for commercial goods transportation under Labor Law section 862-b. Outside those industries, common law applies.
Florida
Common law test for most purposes. Florida Statute section 443.1216 (unemployment) defines employment using a right-to-control framework. Workers compensation under chapter 440 uses its own statutory factor list. Florida is generally contractor-friendly.
Georgia
Common law test for most purposes. O.C.G.A. section 34-8-35 (unemployment) uses a control-based test.
Virginia
Common law test under the Virginia Employment Commission rules. Virginia adopted a 20-factor IRS-style test for state employment tax purposes.
Michigan
Common law test, codified at MCL 421.42(5) for unemployment, with an “economic reality” test layered on top under case law.
Arizona
Common law test, with A.R.S. section 23-1601 providing a “Declaration of Independent Business Status” that creates a rebuttable presumption of contractor status if executed correctly. Arizona is one of the few states with a statutory mechanism to lock in contractor status by mutual declaration.
Ohio
Common law test for most purposes. Ohio uses different tests for unemployment and workers compensation.
North Carolina
Common law test under N.C. Gen. Stat. section 96-1(b)(11) for unemployment.
South Carolina
Common law test under S.C. Code section 41-31-110 for unemployment.
The trap of multiple tests in one state
The state-by-state picture is more complicated than the bucket the state falls into, because a single state often uses different tests for different laws. Some examples.
- Massachusetts uses ABC for wage and overtime (Section 148B) but has a separate common law test for unemployment (Mass. General Laws Chapter 151A).
- Illinois uses ABC for construction but common law for most other purposes.
- New York uses common law generally but ABC for construction and commercial goods transport.
- California uses ABC for the Labor Code, Unemployment Insurance Code, and wage orders, but the older Borello multi-factor test for certain exempt categories.
- Washington uses ABC-like for unemployment but a different test for workers compensation.
A worker who clearly passes the IRS common law test can still fail a state ABC test. A worker who passes the ABC test in California might fail it in Massachusetts because the Massachusetts prong B is interpreted more strictly. Generic contractor agreements that work in 40 states can be invalid in the other 10.
What this means for a US founder
The practical implications are large but manageable.
Inventory contractors by state. For each contractor, know which state they live in and work from. Treat that as the controlling jurisdiction.
Apply the strictest applicable test. If a contractor is in California, the California ABC test controls. If in Massachusetts, the Massachusetts ABC test. If in Texas, the common law test. Federal IRS rules apply on top of state rules but do not override them.
Restructure relationships that fail the state test. Options are usually some combination of: converting to W-2 employment (directly or through an Employer of Record), restructuring the engagement to fit a state exemption, contracting through a clearly independent corporate entity, or ending the engagement.
Track relocations. Remote workers move. A contractor who relocates from Texas to California changes which test applies. State employment tax registration in the new state may also be required.
Document the analysis. For each contractor, write down which state test applies and how each prong is satisfied. Date it. Save it. If the state Department of Labor audits, this is the document that defends the classification.
For payment, contracts, 1099 filing, and ongoing compliance across multiple states, the manual workflow becomes unmanageable above ten or fifteen contractors. We built our contract management product for exactly this case, with state-by-state classification checks at engagement, automated 1099 generation, and tracking when a contractor’s state of residence changes. See our pricing page for what it costs.
When to talk to a lawyer
Three situations push the classification question beyond a self-service review.
A worker has filed an SS-8 or a state classification complaint. The exposure is already crystallized. Get counsel.
You are considering converting a class of contractors to employees. The transition has tax, benefits, and legal implications across federal, state, and local layers. A short engagement with an employment lawyer in the relevant state usually pays for itself.
A state Department of Labor audit notice has arrived. Do not respond without counsel. The questions are pointed and the answers shape the result.
The state-by-state classification map is messy. Different states use different tests, sometimes different tests within the same state for different laws, and the rules change as courts interpret them. The IRS common law standard is the floor. State laws can be stricter, and in ABC states they usually are.
The right move for a US company with contractors in multiple states is to inventory them by state, apply each state’s test, document the analysis, and revisit annually. The cost of getting this right at engagement is small. The cost of getting it wrong, paid in back wages, payroll taxes, and Labor Code penalties, is large.