W-2 and 1099.

W-2 and 1099 is US shorthand for the two basic ways of engaging a worker, named after the tax forms involved. A W-2 worker is an employee: the employer runs payroll, withholds income tax, pays employer taxes and provides the protections and benefits attached to employment. A 1099 worker is an independent contractor: the business reports what it paid on a Form 1099 and withholds nothing; the contractor handles their own taxes, insurance and benefits.

The distinction

Whether someone may be engaged as a 1099 contractor is not a matter of choice or contract wording but of legal tests, which differ by law and by state. Recurring themes:

• Behavioural control: who directs how, when and where the work is done?
• Financial control: does the worker carry entrepreneurial risk, invest in tools, serve multiple clients?
• Relationship: is the work integral to the business, open-ended, exclusive?

Several states apply stricter versions (such as ABC-type tests) under which a worker is an employee unless the business proves otherwise. Federal guidance from the Department of Labor and state agencies such as the New York State Department of Labor set out how the tests are applied.

Misclassification

Engaging a de facto employee as a 1099 contractor is misclassification. Consequences can include back taxes and contributions, penalties, and liability for wage-and-hour claims. Enforcement attention has grown at both the federal and state level, and misclassified workers themselves can bring claims for unpaid overtime and benefits. Functionally, the theme is the US equivalent of the Dutch DBA discussion: same question, different tests.

Relevance to Hero

For placements via Hero USA Inc. (New York, office under construction), every engagement is set up deliberately on one of the two tracks: W-2 employment — directly or through an employer-of-record construction — where the facts point to employment, and a compliant 1099 arrangement with contract, verification and file where the professional genuinely operates a business. The classification check that Hero standardised in the Netherlands as the DBA check has its American counterpart here, and the same house rule applies: "everything we say is 100% true", including about a worker's status.