Misclassification of Employees can Prove Costly
It can sometimes be difficult to discern whether a member of the workforce is an employee or an independent contractor. Both positions may require the same skills, perform similar tasks, and face the same expectations and demands from an employer. Cherry Hill employment lawyers note that workers should understand the differences, however. When an employee is misclassified as an independent contractor, the financial consequences can be steep and long-lasting.
The responsibility of correctly classifying independent contractors rests, ultimately, with an employer. Since employers are not required to withhold various taxes from an independent contractor, there is a financial incentive to designate members of their workforce as independent contractors. A worker who suspects they may be misclassified need look no further than their paycheck for proof. When no withholdings are indicated, they are considered by their employer to be an independent contractor; the worker must then pay the taxes in full when they file their federal and state tax return.
Independent Contractors do not Share Similar Benefits
Independent contractors are vulnerable in other important ways. Unlike an employee, an independent contractor cannot seek Workers’ Compensation benefits in connection with an injury sustained on the job. If their position is terminated, they may not seek unemployment benefits, and they will receive no healthcare coverage pursuant to the Affordable Care Act (ACA). Many of the other protections afforded to employees – including overtime pay, rest breaks, vacation pay, and a guaranteed minimum wage – are unavailable to independent contractors.
When trying to determine whether a misclassification of employment has taken place, workers can look to several key differences. Independent contractors generally make their own hours, incur their own work-related expenses and maintain the ability to accept or reject a work assignment at their leisure. By contrast an employee has no right to refuse an assignment, works according to the schedule set by their employer, and rarely pays for supplies or travel required for work.
Back Pay and Restoration of Benefits are Often Available for Misclassified Employees
Fortunately, there are remedies for an employee who successfully establishes that they have been misclassified as an independent contractor. Most importantly, misclassified employees are entitled to back pay. The U.S. Department of Labor’s Wage and Hour Division (WHD) in 2015 recovered $74 million on behalf of American workers who were erroneously classified. The WHD also engages in extensive outreach with employers in an effort to clarify the factors which should be considered when properly classifying individual members of their workforce.
When an employee believes that they have been misclassified, they should first approach their supervisor and request a correction. If their request is met with resistance or denied outright they may seek an independent audit by the Internal Revenue Service (IRS), who will determine whether a misclassification has indeed taken place. It is important to note that workers who speak out about their classification status may not be retaliated against. When an employer demotes or terminates work based upon a complaint of misclassification, the worker should seek out the counsel of an experienced employment lawyer.