Worker Classification: A 2026 Hot Spot
With gig and remote work redefining the modern workforce, proper classification is one of the biggest compliance challenges employers will face in 2026. The Department of Labor and IRS are stepping up enforcement, targeting companies that blur the line between independent contractors (1099) and employees (W-2).
There's No Such Thing As A 1099 Employee
The New Test
Under the DOL’s updated economic realities test, no single factor determines status. Instead, investigators consider the overall relationship—control of the work, who provides tools, how pay is structured, whether the role is integral to the business, and how long the arrangement lasts.
Where Employers Slip
Even well-intentioned businesses often miss the mark. Supplying company laptops, setting fixed hours, or requiring approval for time off are all signs of an employment relationship—not an independent contractor. The penalties can be severe, including back wages, unpaid taxes, and benefits exposure.
How To Stay Compliant
Conduct annual reviews of all 1099 arrangements. Ensure contracts reflect independence and that day-to-day practices match. When in doubt, classify conservatively and seek legal guidance—because in today’s enforcement environment, “close enough” isn’t compliant enough.
The Bottom Line
Worker classification isn’t just a paperwork exercise—it’s a reflection of how you manage and value your workforce. As flexibility and remote work continue to expand, HR must balance opportunity with compliance. Taking time now to review contractor relationships, clarify expectations, and tighten documentation will protect your organization from costly mistakes later. In 2026, smart employers won’t wait for a DOL audit—they’ll lead with clarity, consistency, and compliance.
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Erin Eilers, M.S., PHR
Eilers HR Consulting
erin@eilershr.com | (561) 876-4750
