This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.
A common 2026 remote-hiring pattern looks like this: a Florida company finds the perfect hire — right skills, right rate, available immediately. The candidate lives in Massachusetts. Nobody wants to stand up out-of-state payroll for one person, so the parties sign a short independent-contractor agreement, the worker invoices monthly, and everyone moves on. The arrangement runs quietly for a year or two. Then it ends — a slow quarter, a missed deadline, nothing dramatic — and the worker files for unemployment in their home state. The state agency asks the one question the contract never anticipated: why was this person a 1099?
The answer the company gives — “because the contract says so” — is the answer that loses. In a growing list of states, the label the parties chose is close to the least important fact in the analysis. And for Florida companies hiring remotely, the gap between what Florida law would tolerate and what the worker’s home state demands is where the real exposure lives.
Florida instincts do not travel
Florida tests independent-contractor status under a common-law, right-of-control framework — a multi-factor balancing exercise where a well-drafted agreement, genuine scheduling freedom, and payment by the project go a long way. Florida companies build their hiring instincts around that flexibility, and inside Florida those instincts mostly hold up.
Massachusetts is a different regime entirely. Under M.G.L. c. 149, § 148B, every worker is presumed to be an employee, and the hiring company can only rebut the presumption by proving all three prongs of the so-called ABC test. Prong A requires that the worker be free from the company’s control and direction, both on paper and in fact. Prong B requires that the service performed be outside the usual course of the company’s business. Prong C requires that the worker be customarily engaged in an independently established trade or business of the same nature. Fail any one prong and the worker is an employee — no balancing, no weighing, no partial credit. New Jersey, Connecticut, Vermont, and Illinois apply versions of the same test for at least some purposes, and California codified an ABC test after Dynamex Operations West v. Superior Court. But Massachusetts pairs its test with the harshest remedies in the country, which is why it deserves its reputation as the hardest state in America to defend a 1099.
Prong B is where the arrangement dies
Prong B is the one that catches sophisticated companies, because no contract drafting can fix it. The question is not how independent the worker is. The question is whether the worker is doing the thing the company is in business to do. A hypothetical marketing agency that engages a freelance designer in Boston to produce client deliverables fails Prong B — design is what the agency sells. A software company that engages a remote support representative fails — supporting the product is the company’s usual course. A professional-services firm that engages someone to perform the professional service itself fails, almost by definition. The engagements that pass are the ones at the edges: the plumber who fixes the office sink, the outside accountant who closes the books, the security vendor who watches the parking lot. If the worker’s output is what your customers pay you for, Prong B is unavailable, and in an ABC state that ends the inquiry.
The Florida choice-of-law clause will not save you
The instinctive fix — governing-law clause pointing to Florida, signature block in Jacksonville, invoices to a Florida address — does not work. Wage-and-hour protection follows the place where the work is performed, not the header on the contract. A Massachusetts court applying the Massachusetts Wage Act to a Massachusetts resident working Massachusetts hours will not be talked out of jurisdiction by a Florida forum clause, and an aggressive plaintiff will characterize the clause itself as an attempt to contract around a statute that expressly voids private waivers. The same logic applies in every protective-statute state. The practical rule for a Florida company is simple: you inherit the employment law of every state where a worker regularly performs services for you, one worker at a time.
The damages math is what makes this different
Misclassification in most states is an expensive cleanup. In Massachusetts it is a strict-liability event with mandatory trebling. A worker reclassified as an employee can reach back for unpaid overtime, earned sick time, expense reimbursements, and late-paid wages, and the Wage Act requires the court — not permits, requires — to award three times the lost wages, plus twelve percent interest, plus the worker’s attorneys’ fees. Good faith is not a defense to trebling. The Attorney General can issue civil citations up to twenty-five thousand dollars per violation without any complaint from the worker, and an unemployment filing is often the trigger: the agency determines the worker was an employee, assesses back contributions, and cross-reports. Behind the state exposure sits the federal layer — back payroll taxes, penalties, and interest on every 1099 payment that should have been W-2 wages. For a worker earning in the mid five figures, the fully loaded downside routinely runs to several multiples of what proper payroll would have cost over the same period.
The structures that survive
There are four clean paths, in descending order of control and ascending order of cost per hour. First, put the worker on W-2 payroll directly: register with the state’s revenue and unemployment agencies, enroll in state-mandated programs (Massachusetts adds paid family and medical leave contributions and earned sick time accrual), and absorb an employer burden that typically runs ten to twelve percent on top of the wage. For one or two remote workers this is more paperwork than money. Second, use an employer-of-record or professional employer organization — the EOR is the legal employer in the worker’s state, you direct the work, and the classification risk moves to an entity built to carry it. Third, for project-based needs, engage through a staffing agency that employs the worker W-2 and bills you a marked-up rate. Fourth — and only for genuinely independent counterparties — structure a true business-to-business relationship: the worker operates through their own entity, carries their own insurance, serves multiple customers, sets their own methods, and, critically, provides a service that is not your core offering. If the work is the thing your company sells, no amount of B2B dressing fixes Prong B, and the fourth path is not available no matter how the invoices are styled.
The diligence angle buyers already know
Misclassification is also a deal issue, because liability survives the handshake. In an acquisition, a target that has run its delivery team on 1099s in ABC states hands the buyer a contingent liability with a three-year lookback and mandatory trebling, and buyers price it accordingly — escrows, special indemnities, or a purchase-price haircut sized to the payroll delta. The pattern shows up constantly in startup diligence, where an early team of “contractors” turns out to be the entire engineering organization, and in regulated-industry deals like the Florida medspa transactions where worker-classification questions stack on top of corporate-practice rules. A company that expects to sell within five years should treat its contractor bench as a diligence exhibit in waiting, because that is exactly what it will become.
Before the first invoice clears
The checklist is short. First, map the test that actually applies — the worker’s state, not yours; if it is an ABC state, assume employee status unless all three prongs are provable on paper. Second, price the alternative honestly: the W-2 delta is usually ten to twelve percent plus administration, and paying it buys off a treble-damages statute; framed that way, it is inexpensive insurance. Third, if the 1099 path genuinely fits, build the file now — the worker’s entity documents, certificate of insurance, evidence of other customers, and a statement of work that describes a discrete deliverable rather than ongoing labor. Fourth, re-run the analysis annually and at every change in the relationship, because a contractor who started as a project vendor and drifted into forty-hour weeks on your core product has drifted across the line, and the statute does not care that nobody updated the paperwork. Companies that keep an outside general counsel relationship tend to catch the drift; companies that revisit the question only at termination tend to learn about it from a state agency.
The pattern to remember is the one from the top: these arrangements almost never blow up while they are running. They blow up at the exit — the layoff, the ended engagement, the unemployment filing, the sale of the company. By then the classification question has been accruing an answer, at three times the wage, for years.
If you are a Florida company hiring remote workers in other states — or discovering mid-diligence that a target’s contractor bench is really a payroll — feel free to reach out to our firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
