Virginia’s unemployment statute explicitly routes classification through the twenty factors
The Virginia Employment Commission states that Virginia Unemployment Compensation Act § 60.2-212(C) treats services for remuneration as employment unless the Commission determines that the individual is not an employee for FICA and FUTA purposes based on application of the twenty factors from IRS Revenue Ruling 87-41. That makes the older twenty-factor framework operationally important in a Virginia UI file even though modern IRS educational pages often group common-law concepts into behavioral control, financial control, and type of relationship.
Do not replace the VEC framework with a generic three-category memo and assume the labels are enough. The categories can help organize evidence, but the Virginia page specifically lists the twenty factors and cautions that not all must be present. The employer should be able to trace its conclusion to the factors VEC says it uses. A short executive summary can group them, while the underlying workpaper records each relevant factor and the evidence that supports or cuts against employee status.
There is no magic number of factors and no honest reason to invent one
VEC describes the factors as guides for assessing the likelihood of an employee or independent-contractor relationship and says not all factors must be present. Some factors may carry little weight in a modern occupation, while others can be decisive because they reveal a meaningful right to control. A scoring rule such as “11 contractor factors wins” gives false precision and can reward weak evidence repeated across several related items.
Instead, write a weight note. Which facts most clearly show who controls the means and manner of work? Which financial facts show an independent business rather than reimbursed labor? Which relationship facts show continuity, integration, market availability, and termination rights? If five factors all arise from the same contract clause, do not treat them as five independent pieces of proof. The memo should explain why the relationship as a whole points one way under the VEC framework.
Behavioral factors are best tested with a week-in-the-life reconstruction
The VEC list includes instructions, training, integration, services rendered personally, hiring and supervision of assistants, continuing relationship, set hours, full-time requirement, doing work on the employer’s premises, order or sequence set, and oral or written reports. Rather than answering these from policy manuals, reconstruct a representative workweek from calendars, assignments, messages, deliverables, and worker records. That reveals how much method control existed in practice.
Pay particular attention to rights that were available even if rarely exercised. If a contract lets the business set the sequence, require personal performance, and reject assistants, a manager’s claim that “we usually left them alone” may not eliminate the reserved control. Conversely, a requirement to report completion or meet a customer deadline should be described accurately rather than automatically classified as employee supervision. Context and the actual right to direct matter more than labels.
Financial factors should show who carries the business economics of the work
VEC’s published factors address payment by time, payment of business or travel expenses, furnishing tools and materials, significant investment, and the possibility of profit or loss. Build these from accounting records. How was the worker paid? Which expenses were reimbursed? Who bought the important tools? Did the worker invest in facilities or equipment used across customers? Could efficient performance, pricing, staffing, or cost management create a real profit—or could a bad estimate create a loss?
Avoid symbolic investment. Buying a phone case or paying a small registration fee does not necessarily demonstrate an independent business in a professional relationship. Also avoid treating hourly payment as automatically dispositive; it is one fact among the VEC factors. The strongest workpaper quantifies the economics: project price, costs borne, unreimbursed investment, change-order risk, and whether the worker could manage those variables independently.
Relationship factors can reveal dependence that the contract does not show
The VEC factors also consider whether the person works for more than one firm, makes services available to the general public, and the parties’ rights to discharge or terminate. Review external business presence, customer history, exclusivity in practice, and what happens if either side ends the engagement. A worker who theoretically may serve competitors but works full time under a payer-controlled schedule may have little practical market availability.
Document the distinction between contractual permission and actual business activity. Neither one automatically controls, but the gap can be informative. If the individual actively advertises and performs similar services for unrelated clients, preserve contemporaneous evidence. If the worker’s only “business” is this engagement and termination works like at-will employment, record that too. The goal is a complete relationship file, not a collection of contractor-friendly artifacts.
Virginia exemptions should be screened separately from the twenty-factor conclusion
VEC publishes a page that pairs the twenty factors with Virginia exemptions to employee classification. Certain occupations or arrangements can have statutory exclusions or special treatment. The existence of exemptions does not mean a company should bend the twenty-factor analysis until an exempt worker appears independent. First identify whether a specific exemption applies to the service and whether every condition is satisfied; then document that statutory path separately.
Add an exemption gate before the full factor memo for industries that commonly encounter special rules, such as certain commissioned real estate or insurance services and specified transportation arrangements. Cite the exact current VEC language and facts meeting the exemption. If the exemption is uncertain, do not mark the worker exempt because the occupation sounds similar. Proceed with the ordinary analysis or obtain qualified guidance.
A VEC-ready file should explain changes over time instead of forcing one result across the whole engagement
A contractor can become more employee-like as a project turns into an ongoing role. A company may begin purchasing a defined deliverable, then add recurring training, fixed hours, reports, company equipment, and full-time expectations. Since several VEC factors expressly address those changes, classification review should be tied to periods. Record the point at which a material fact changed and reassess from that date.
For an audit or claim, prepare a period map before writing the conclusion. If 2025 involved project work and 2026 involved managed weekly labor, say so. Different treatment across periods is not necessarily inconsistency; it may reflect a genuinely different relationship. What creates risk is insisting that the facts never changed when the company’s own calendars and accounting records show they did.
VEC EVIDENCE TOOL
Twenty-factor evidence map by control theme
Do not total the rows. Use the map to identify the strongest evidence and the factors that need explanation.
| Theme | Representative VEC factors | Best records | Analysis question |
|---|---|---|---|
| Behavioral direction | Instructions, training, sequence, hours, reports | Messages, calendars, SOPs, deliverables | Who had the right to control method and timing? |
| Personal/staffing control | Personal service, assistants, full-time expectation | Contract, staffing records, substitutions | Could the worker build and staff an independent operation? |
| Financial structure | Payment, expenses, tools, investment, profit/loss | Invoices, reimbursements, asset/cost records | Who carried business risk and economics? |
| Market relationship | Multiple firms, public availability | Client history, marketing, proposals | Did a market-facing business exist beyond this payer? |
| Ending relationship | Discharge and termination rights | Termination clauses, actual exits | Does ending the relationship resemble a business contract or employment? |
WORKED EXAMPLE
Example: “14 contractor factors” collapses after related facts are weighted properly
A Virginia consulting firm’s spreadsheet counts 14 of 20 factors as contractor indicators for an analyst. Several of those “wins” come from the same agreement: it calls the analyst independent, says outside clients are allowed, and says the analyst supplies tools. Actual records show fixed full-time hours, weekly training, company equipment, required daily reports, and no outside work during the engagement.
The revised analysis abandons the score. It groups the factors by behavioral, financial, and relationship evidence while still tracing each one to VEC’s twenty-factor list. The company identifies the reserved and exercised control as more significant than repeated labels in the contract. Management now has a classification decision grounded in the whole relationship rather than favorable arithmetic.