Statutory Compliance Research • DOL Rule 29 CFR § 795
2026 Worker Classification Guide (1099 vs W-2 Compliance)
An exhaustive statutory analysis of the US Department of Labor’s 6-Factor Economic Reality Test and state-level ABC classification tests.
SPR
StatePayRules Legal & FLSA Research Team Verified Author
Employment Law Analysts
✓ E-E-A-T
Reviewed by J. R. Miller, CPP Certified Payroll Professional & Labor Law Specialist
Last Updated: August 2026
Primary .Gov Citation Verified
Read Editorial & Fact-Checking Policy →
1. The DOL 6-Factor Economic Reality Test
Under 29 CFR § 795, the US Department of Labor evaluates worker classification using six non-exhaustive economic factors to determine whether a worker is economically dependent on the employer (W-2 employee) or in business for themselves (1099 contractor):
- Opportunity for Profit or Loss Depending on Managerial Skill: Can the worker negotiate rates, accept/decline work, or hire helpers?
- Investments by the Worker and Employer: Is the worker making capital or entrepreneurial investments in tools, equipment, or business growth?
- Degree of Permanency of Working Relationship: Is the work relationship indefinite, continuous, or project-based?
- Nature and Degree of Control: Does the employer set schedules, supervise execution, or restrict working for competitors?
- Extent to Which Work Performed is Integral to Employer's Business: Is the work core to the company's primary business model?
- Specialized Skill and Initiative: Does the worker bring specialized business initiative to compete in an open marketplace?