21 May Navigating Worker Classifications For Churches
Employees vs. Independent Contractors: What Ministries Need to Know
Religious ministries frequently engage independent contractors for various services, including musicians, athletic coaches, and other specialized roles. However, proper classifications of workers is crucial to ensure compliance with federal and state labor laws. Misclassification can lead to legal penalties, back taxes, and liability for unpaid benefits. This article examines the federal independent contractor test and state-specific laws, particularly focusing on jurisdictions that use the stricter ABC test.
Federal 6-Factor Independent Contractor Test
Under federal law, the U.S. Department of Labor (DOL) applies a 6-factor test to determine whether a worker qualifies as an independent contractor under the Fair Labor Standards Act (FLSA). These factors assess the economic realities of the working relationship, emphasizing the worker’s degree of independence and the employer’s control. Most states follow this 6-factor test, with some exceptions noted below. A holistic review of these factors determines a worker’s classification, with no single factor being dispositive.
The Federal six factors are:
- Opportunity for Profit or Loss – Does the worker have the potential to earn more based on managerial skill, such as hiring assistants or negotiating pay?
- Investment by the Worker – Has the worker invested in tools, equipment, or their own business, distinguishing them from an employee?
- Degree of Permanence – Is the relationship temporary or indefinite? Employees typically have ongoing work arrangements.
- Nature and Degree of Control – Does the ministry control the worker’s schedule, performance, and assignments? Greater control suggests an employment relationship.
- Essential Nature of the Work – Is the service provided something that is outside or not part of the usual course of business of the ministry? If the worker is providing a service that is part of the regular course of business for the ministry (i.e., music), the worker is more likely to be classified as an employee.
- Skill and Initiative Required – Does the worker operate independently and exercise entrepreneurial initiative, or does the ministry dictate tasks and methods?
(For further information, see US Department of Labor – Wage and Hour Division (DOL/WHD) Fact Sheet.)
State-Level Classification Rules and the ABC Test
While the federal 6-factor test provides a baseline, many states impose stricter standards. A growing number of states use the ABC test, which presumes workers are employees unless all three of the following conditions are met:
- The worker is free from the employer’s control and direction, and
- The worker performs a service that is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
- The worker customarily engages in an independently established trade, occupation, or business.
Ministries operating in ABC test states must carefully evaluate whether independent contractors meet all three prongs applicable for their specific jurisdiction. If any prong fails, the worker is legally an employee.
Some States That Use the ABC Test
The following states have adopted the ABC test (with some variations) for worker classification:
- California (Dynamex ruling, AB 5 codified into California Labor Code § 2775–2787 with exemptions for some professions.)
- Massachusetts (One of the strictest ABC test applications, covering wage laws, labor protections, and worker classification.)
- New Jersey (Applies the ABC test across wage and hour laws, unemployment insurance, and other labor statutes.)
- Illinois (Uses the ABC test in multiple labor law contexts beyond unemployment insurance.)
- Connecticut (Implements the ABC test beyond unemployment insurance, including wage and worker protections.)
- Vermont (Implements the ABC test beyond unemployment insurance, including wage and worker protections.)
- Maine (Used primarily to determine whether a worker is classified as an independent contractor or an employee for unemployment insurance and workers’ compensation purposes.)
- Rhode Island (Uses the ABC test primarily for unemployment insurance determinations under R.I. Gen. Laws § 28-42-7.)
- Washington (Washington uses a modified version of the ABC test for determining independent contractor status, primarily for unemployment insurance and workers’ compensation purposes under Revised Code of Washington (RCW) § 50.04.140 and RCW § 51.08.195.)
These states generally default to employee classification unless clear independent business status is demonstrated. Please see the list below for the specific state statutory requirements.
Best Practices for Religious Ministries
Given these legal complexities, religious ministries should take the following precautions when compensating independent contractors:
- Use Written Specs and Agreements – The hirer should clearly define the scope of work, autonomy, and have the Independent Contractor provide the contract, business license and proof of insurance naming the ministry as additionally insured.
- Limit Control – Allow independent contractors to set their own schedules and methods of performing work.
- Ensure Business Independence – True independent contractors typically work for multiple clients and provide their own tools or equipment. Ensure your contractors meet these criteria to reinforce their independent status.
- Review and Stay Updated on State-Specific Laws – Ministries operating in states that use the ABC test must carefully evaluate whether workers meet all three prongs of the test. Regularly review state-specific regulations to avoid compliance pitfalls.
- Seek Professional Guidance – State laws vary, and classification errors can be costly. Seeking professional advice or legal counsel ensures compliance.
State-by-State Independent Contractor Rules
Understanding your state’s specific rules is essential for compliance, as worker classification laws vary widely across the U.S. This table serves as a quick reference guide to help ministries identify the primary test applied in their state and locate the relevant legal statutes. By staying informed, you can avoid costly misclassification errors and ensure your ministry operates within the bounds of the law.
| State | Primary Test Applied | State Law or Legal Reference |
| Alabama | Federal 6-Factor Test | No specific state statute |
| Alaska | ABC Test | Alaska Stat. § 23.20.525(a)(8) |
| Arizona | Federal 6-Factor Test | Ariz. Rev. Stat. § 23-902(D) |
| Arkansas | Federal 6-Factor Test | Ark. Code Ann. § 11-10-210(e) |
| California | ABC Test | California Labor Code § 2775 (formerly AB 5) |
| Colorado | ABC Test | Colo. Rev. Stat. § 8-70-115(1)(b) |
| Connecticut | ABC Test | Conn. Gen. Stat. § 31-222(a)(1)(B)(ii) |
| Delaware | ABC Test | Del. Code Ann. tit. 19, § 3302(10)(K) |
| Florida | Federal 6-Factor Test | Fla. Stat. § 443.1216(13)(a) |
| Georgia | Federal 6-Factor Test | Ga. Code Ann. § 34-8-35(f) |
| Hawaii | ABC Test | Haw. Rev. Stat. § 383-6 |
| Idaho | ABC Test | Idaho Code § 72-1316(4) |
| Illinois | ABC Test | 820 Ill. Comp. Stat. 185/10 |
| Indiana | ABC Test | Ind. Code § 22-4-8-1(b) |
| Iowa | Federal 6-Factor Test | Iowa Code § 96.19(18)(f) |
| Kansas | ABC Test | Kan. Stat. Ann. § 44-703(i)(3)(D) |
| Kentucky | Federal 6-Factor Test | Ky. Rev. Stat. Ann. § 341.070(3) |
| Louisiana | ABC Test | La. Rev. Stat. Ann. § 23:1472(12)(E) |
| Maine | ABC Test | Me. Rev. Stat. tit. 26, § 1043(11)(E) |
| Maryland | ABC Test | Md. Code Ann., Lab. & Empl. § 8-205 |
| Massachusetts | ABC Test | Mass. Gen. Laws ch. 149, § 148B |
| Michigan | Federal 6-Factor Test | Mich. Comp. Laws § 421.42(5) |
| Minnesota | Federal 6-Factor Test | Minn. Stat. § 268.035, subd. 9(25) |
| Mississippi | Federal 6-Factor Test | Miss. Code Ann. § 71-5-11(I)(14) |
| Missouri | Federal 6-Factor Test | Mo. Rev. Stat. § 288.034.12 |
| Montana | ABC Test | Mont. Code Ann. § 39-51-201(15) |
| Nebraska | ABC Test | Neb. Rev. Stat. § 48-604(5) |
| Nevada | ABC Test | Nev. Rev. Stat. § 612.085 |
| New Hampshire | ABC Test | N.H. Rev. Stat. Ann. § 282-A:9, III |
| New Jersey | ABC Test | N.J. Stat. Ann. § 43:21-19(i)(6)(A) |
| New Mexico | ABC Test | N.M. Stat. Ann. § 51-1-42(F)(5) |
| New York | Federal 6-Factor Test | No specific state statute |
| North Carolina | Federal 6-Factor Test | N.C. Gen. Stat. § 96-1(b)(12) |
| North Dakota | Federal 6-Factor Test | N.D. Cent. Code § 52-01-01(17) |
| Ohio | ABC Test | Ohio Rev. Code Ann. § 4141.01(B)(2)(k) |
| Oklahoma | ABC Test | No specific state statute |
| Oregon | ABC Test | Or. Rev. Stat. § 657.087 |
| Pennsylvania | ABC Test | 43 P.S. § 753(l)(2)(B) |
| Rhode Island | ABC Test | R.I. Gen. Laws § 28-42-7 |
| South Carolina | Federal 6-Factor Test | No specific state statute |
| South Dakota | Common Law Test | No specific state statute |
| Tennessee | Federal 6-Factor Test | No specific state statute |
| Texas | Federal 6-Factor Test | No specific state statute |
| Utah | Federal 6-Factor Test | No specific state statute |
| Vermont | ABC Test | Vt. Stat. Ann. tit. 21, § 1301(6)(B) |
| Virginia | Federal 6-Factor Test | No specific state statute |
| Washington | ABC Test | Wash. Rev. Code § 50.04.140 |
| West Virginia | Federal 6-Factor Test | No specific state statute |
| Wisconsin | Federal 6-Factor Test | No specific statute |
| Wyoming | Federal 6-Factor Test | No specific statute |
Ensuring Compliance and Protecting Ministries
Religious ministries must carefully classify workers to avoid legal repercussions and back worker’s compensation premiums. While the federal 6-factor test allows some flexibility, ministries in ABC test states face stricter employee presumptions. By following best practices and staying informed on state laws, ministries can responsibly engage independent contractors while protecting their organizations from misclassification risks.
Original content by the Church HR Network. This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.