Worker classification policy + audit

Description

Worker classification is the recurring litigation-and-enforcement battleground of the platform-economy era: whether a person performing work is an employee (with wage-and-hour, tax-withholding, benefits, and unemployment-insurance protections) or an independent contractor (without them) is determined by a multi-factor test that varies by jurisdiction and statute. California's ABC test (codified in AB5, with industry-specific exemptions in AB2257 and Prop 22), the federal common-law right-to-control test, the IRS's twenty-factor test, the UK's three-tier worker / employee / self-employed framework with its IR35 overlay, and the EU Platform Work Directive's rebuttable-presumption regime are the active tests; many overlap, none agree on the dispositive factor. The operational system is a written classification policy that names which test applies in which jurisdiction, applies it consistently across the workforce, and audits classifications periodically against changes in the engagement (a contractor whose role drifted toward employee territory over six months is the typical reclassification finding). The structurally interesting piece is the retroactive exposure profile; misclassification typically does not just trigger a forward-looking reclassification but back wages, back taxes, back benefits, penalty multipliers, and, in some jurisdictions, representative-action exposure.

Applicability

Applies when: business participants include individual-workers.

How predicates are evaluated

Required by (13 regulations)

• FTC Act

  FTC Section 5 misclassification enforcement risk.

  15 U.S.C. §§41-58; 16 CFR Parts 255, 425

• CA AB5

  Cal. Lab. Code §2775 — three-prong ABC test as default; document per-engagement analysis.

  Cal. Lab. Code §2775

• CA AB2257

  Cal. Lab. Code §§2776-2785 — 200+ exemptions including B2B safe harbor (12 conditions).

  Cal. Lab. Code §§2776-2785

• CA Prop 22

  Cal. Bus. & Prof. Code §§7448-7467 — app-based-driver classification regime.

  Cal. Bus. & Prof. Code §§7448-7467

• MA Question 3 / IC Statute

  Mass. Gen. Laws ch. 149 §148B — strict prong-B ABC test.

  Mass. Gen. Laws ch. 149 §148B

• NJ Misclassification

  N.J. Stat. Ann. §43:21-19(i)(6) + 2020 stop-work-order amendments.

  N.J. Stat. Ann. §43:21-19(i)(6) + 2020 stop-work-order amendments.

• IRS §530

  Revenue Act of 1978 §530 — federal payroll-tax safe harbor (substantive consistency + reporting consistency + reasonable basis).

  Revenue Act of 1978 §530

• FLSA Economic Realities

  29 CFR Part 795 (2024 DOL final rule) — six-factor totality-of-circumstances test.

  29 CFR Part 795 (2024 DOL final rule)

• EU PWD

  Directive (EU) 2024/2831 — Article 5 rebuttable presumption of employment + algorithmic transparency.

  Directive (EU) 2024/2831

• UK IR35

  ITEPA 2003 Chapter 8/10 — Status Determination Statement framework.

  ITEPA 2003 Chapter 8/10

• UK Uber v Aslam

  Employment Rights Act 1996 s230 + Aslam UKSC 2021 — worker-status intermediate category.

  Employment Rights Act 1996 s230 + Aslam UKSC 2021

• AU Sham Contracting

  Fair Work Act 2009 s357 — sham-contracting prohibition + post-2022 contract-primacy multi-factor test.

  Fair Work Act 2009 s357

• CA Dependent Contractor

  McKee v Reid's Heritage Homes 2009 ONCA 916 — dependent-contractor common-law category + reasonable-notice obligation.

  McKee v Reid's Heritage Homes 2009 ONCA 916

Fulfilled by (1)

• In-house build · high effort

ClearLaunch does not accept payment from vendors. Methodology.

Evidence formats

• classification policy
• classification audit log
• jurisdiction-specific test memos