Being called a 1099 contractor does not make you one

By Equipo Saplic Published on 11/08/2026 Updated on 11/08/2026

And misclassification costs you overtime, unemployment insurance and payroll tax contributions.

In this guide
  1. What turns on it
  2. The test is about control
  3. Signs you may be misclassified
  4. Exempt misclassification too
  5. What it is worth
  6. Where to raise it

Whether you are an employee or an independent contractor determines a great deal in the American system, and the label on your paperwork is not decisive.

What turns on it

As an employee you get:

  • Minimum wage and overtime protection under the FLSA
  • Employer-paid share of FICA payroll taxes
  • Access to unemployment insurance
  • Workers' compensation coverage
  • Anti-discrimination protections in most cases

As a contractor you get none of those by default, and you carry the full self-employment tax burden.

The test is about control

Classification turns on the economic reality of the relationship, not what the contract calls it. Relevant factors include the degree of control the business exercises, whether the work is integral to the business, the permanence of the relationship, and the worker's opportunity for profit or loss.

The Department of Labor has proposed frameworks addressing joint employer status under the FLSA, FMLA and MSPA, distinguishing vertical joint employment — where a worker is employed by a subcontractor or staffing agency but performs work for an intermediary — from horizontal arrangements.

Signs you may be misclassified

  • You work set hours determined by the company
  • You use company equipment and systems
  • You cannot work for competitors
  • You are supervised in how the work is done, not just what is delivered
  • The relationship is ongoing rather than project-based

Exempt misclassification too

A separate issue: being classified as exempt from overtime when your duties do not meet the test. Both the salary and duties tests must be satisfied.

Paying someone a salary does not make them exempt.

What it is worth

If you have been misclassified and working over 40 hours, back overtime can be substantial. FLSA claims have their own limitations periods.

Where to raise it

The Wage and Hour Division investigates FLSA misclassification. State labour departments and tax agencies also pursue these cases, since misclassification affects state tax and unemployment funds.

Frequently asked questions

Why does classification matter?
Employees get minimum wage and overtime, the employer’s share of FICA, unemployment insurance, workers’ compensation and anti-discrimination protections. Contractors get none of those by default.
Does my contract decide whether I am a contractor?
No. Classification turns on the economic reality of the relationship — control, permanence, how integral the work is and the opportunity for profit or loss.
What are the signs of misclassification?
Set hours determined by the company, use of company equipment, an inability to work for competitors, supervision of how the work is done, and an ongoing rather than project-based relationship.
Can I be misclassified as exempt from overtime?
Yes, and it is common. Both the salary and duties tests must be met. Paying someone a salary does not make them exempt.
Where do I raise a misclassification issue?
The Wage and Hour Division investigates FLSA claims. State labour departments and tax agencies also pursue these cases.

Sources

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