Other Classification Tests Retailers Must Understand While the DOL’s economic realities test governs federal wage and hour laws, other agencies and states use different standards. Flooring retailers should be aware of these frameworks to stay compliant with tax, benefits, and employment laws. 1. Common Law Control Test (IRS and Federal Statutes) The IRS has long relied on the “common law control test” for determining a worker’s classification, but it has changed its regulatory guidance on how this test applies. Since 2019, the IRS has moved away from its former 20-factor test and now uses a simplified three-part test for determining a worker’s classification. The 3-part test analyzes (1) behavioral control; (2) financial control; and (3) the relationship of the parties. Courts have used the common law control test to interpret who qualifies as an employee under ERISA or Americans with Disabilities Act. Other federal agencies, like the EEOC or the NLRB, have articulated their own factors for the common law control test. 2. ABC Test (Used in Many States) Some states, like California, Illinois, New York, and Massachusetts, use a stricter test than the economic realities test or the common law control test. This more stringent test is called the “ABC test.” Under the ABC test, a worker is presumed to be an employee unless the employer proves all three conditions are met. A. The worker is free from control and direction; B. The work is performed outside the usual course of the business; and C. The worker is customarily engaged in an independent trade. In other words, the burden lies with the employer to disprove that a worker is an employee. This presumption makes it far easier for a worker to claim misclassification.
20 Premier Flooring Retailer tise | 2026 “ There is no single rule that protects retailers—only careful documentation and intentional business practices.”
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