Am I an Independent Contractor if I Work Remotely?

The Modern Workplace and the Illusion of a Label

The rise of flexible work, especially for remote workers, has blurred traditional employment lines. A common and costly misconception is that an employer’s label of independent contractor, or even a signed agreement, settles the matter. However, the law looks beyond titles to the reality of the employment relationship. A signed “independent contractor agreement” can be meaningless if the day-to-day reality of the job reflects an employer-employee dynamic.

This confusion is particularly acute for remote workers, many of whom assume working from home automatically makes them an independent contractor. The IRS and the U.S. Department of Labor (DOL) have clarified that the same legal tests apply regardless of where the work is performed. The distinction is critical, as misclassification can strip workers of minimum wage, overtime, unemployment insurance, and anti-discrimination protections. Employers have a financial incentive to misclassify workers to avoid payroll taxes and the cost of benefits, creating a systemic issue where workers may unknowingly forfeit essential rights.

The High Cost of a Wrong Label

Being misclassified as an independent contractor has profound financial and legal consequences. The label of employee unlocks a suite of rights and social safety nets unavailable to those deemed self-employed. The most immediate impact is on pay. Employees are protected by the Fair Labor Standards Act (FLSA), which mandates minimum wage and overtime. In New York, employees are also protected from illegal wage deductions. Independent contractors have no such guarantees, making them vulnerable to wage theft. Beyond pay, employee status provides access to a critical safety net, including unemployment insurance and workers’ compensation, which covers medical expenses and lost wages from on-the-job injuries. An independent contractor who is laid off or injured while working bears the full financial burden alone. Furthermore, contractors are responsible for the full amount of self-employment taxes, whereas employers pay half of an employee’s Social Security and Medicare taxes. Finally, crucial civil rights protections and access to job-protected leave, like New York’s Paid Family Leave program, are primarily tied to employee status.

Legal Tests That Define Your Employment Relationship

Determining a worker’s status is not based on a single rule but on multi-factor tests that examine the “totality of the circumstances.” For federal wage law, the DOL uses the economic realities test. For federal taxes, the IRS applies a common-law test focused on behavioral control, financial control, and the relationship of the parties. New York State relies heavily on its own “direction and control” test. While the tests differ slightly, they all aim to determine who truly controls the work and the financial aspects of the job.

Features of Job Roles Within Companies

• Control of Workflow: An employee will have their workflow directed by their employer, who determines when, where, and how work is performed. Independent Contractors will determine when their work is done and how it accomplished.
• Worker Finances: Employers determine how much an employee is paid, whether they receive a salary or hourly wage. Contractors are typically paid a flat fee for each project they take on.
• Working Relationship: Employees have an understood relationship with their employer – they will continue working for the company or business until they are fired or they leave. Contractors usually have project-based relationships – their contract ends when they complete the assigned work.
• Work Integration with Company Goals: Employees’ work is integral to the company’s growth goals and functions. Contractors often do supplementary work to aid the company’s workload.
• How Autonomous is Your Roles: Employees are often required to get written or express permission for absences or time away from work. Contractors are responsible for setting their own work hours and can take work from multiple companies.

The Federal “Economic Realities Test”

The U.S. Department of Labor’s primary framework for determining employee status is the economic realities test. Its goal is to determine if a worker is economically dependent on the employer or is genuinely in business for themself. A 2024 rule restored the traditional “totality-of-the-circumstances” analysis, where all six factors are considered without any single factor being given more weight.

• Opportunity for profit or loss depending on managerial skill: Can the worker make business decisions (e.g., hiring help, advertising) that impact their economic success? An example of this is a worker for a automotive company performs assignments only as decided by the company for its corporate clients. The worker does not independently choose assignments, ask for additional work from other clients, advertise the services, or try to reduce costs. The worker regularly agrees to work additional hours to earn more money. In this example, the worker does not exercise managerial skill that affects their profit or loss.
• Investments by the worker and the employer:Does the worker make capital or entrepreneurial investments that support an independent business? This factor examines the exciting opportunities workers have to make strategic investments in their work. When workers make capital or entrepreneurial investments that fuel business growth—such as expanding their client base, optimizing operations to reduce costs, reaching new markets, or boosting sales—these investments demonstrate the hallmarks of independent contractor status. Conversely, when such investment opportunities aren’t present in the work arrangement, this suggests a traditional employee relationship, which offers its own benefits like stability and predictable income without requiring personal financial risk.
• Degree of permanence of the work relationship: Is the relationship continuous and indefinite (employee) or sporadic and project-based (contractor)?
• Nature and degree of control: Does the hiring party control the worker’s schedule, supervision, and ability to work for others? Relevant facts include whether the potential employer controls the following: hiring, firing, scheduling, prices, or pay rates; supervises the performance of the work (including via technological means); has the right to supervise or discipline workers; and takes actions that limit the worker’s ability to work for others.
• Extent to which the work performed is an integral part of the employer’s business: Is the worker’s task a critical part of the company’s principal business?
• Skill and initiative: Does the worker use specialized skills in a way that demonstrates business-like initiative, such as by marketing those skills to a range of clients?

The New York Standard: “Direction and Control”

In New York, the classification framework centers on understanding the level of “direction and control” in the working relationship. The guiding question explores whether the hiring party maintains the authority to direct how work is performed, the methods used, and the outcomes achieved. An employment relationship typically emerges when the employer provides structure through set work hours, supplies tools and equipment, offers direct supervision, and requests exclusive services.

New York’s analysis takes a comprehensive view of the entire working relationship. Courts examine whether the hiring party specifies not only the deliverables but also the processes and techniques. They also celebrate entrepreneurial initiative by considering whether workers have invested in their own equipment, established their own business presence, and embraced opportunities for profit and growth. The flexibility to serve multiple clients and the autonomy to delegate work are strong markers of independent contractor status.

A true independent contractor in New York enjoys running their own business, offering specialized services, and maintaining creative control over their work methods. Consulting with a knowledgeable New York contract lawyer can be an excellent step in understanding your options and rights.

Remote Work is Not a Classification

Your physical work location does not determine your legal status. Both federal and state authorities are clear that the same legal tests of control and economic dependence apply to all remote workers. The IRS states that a remote worker is an employee if the company has the right to control what will be done and how it will be done. In fact, the technology that enables remote work—such as activity tracking software, mandatory virtual meetings, and set work hours—often provides employers with powerful tools for exercising control. A worker may feel autonomous working from home, but from a legal perspective, this digital oversight can build a strong case for an employment relationship.

What to Do If You Suspect Misclassification

If you believe you have been misclassified, it is crucial to protect your rights. First, document everything: contracts, pay stubs (or 1099s), and any emails or messages that show employer control. Keep a personal log of your hours worked. An “independent contractor agreement” can often be your best evidence of a broken contract, as its clauses may directly contradict the label by establishing employer control over your work. You can file a claim for wage theft with the New York State Department of Labor or the U.S. Department of Labor. Most importantly, seek professional legal counsel. An experienced employment attorney can assess your situation, explain your options, and protect you from illegal retaliation.

Call a New York Employment Law Attorney Now

At Filippatos PLLC, we’re committed to helping all workers understand their classification rights and navigate their professional relationships with confidence. Whether you’re building your own business as an independent contractor or thriving in a traditional employment arrangement, we believe every worker deserves clarity, fair treatment, and respect in the workplace. If you are experiencing discrimination at work, please give us a call at 888-9-JOBLAW for a free consultation. We will do our utmost to help secure you the justice you deserve.