Employee Classification

If you’re an employee, you are legally protected against workplace discrimination, but unfortunately, too many people don’t know their rights and some employers count on that fact so they can continue manipulating and mistreating workers.

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Employee misclassification is when employers incorrectly label workers as independent contractors rather than employees to avoid paying taxes and other payments.

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The “ABC” test is criteria used by both the New Jersey Unemployment Compensation Law and Wage and Hour Law to determine if a worker can be classified as an independent contractor.

Those criteria are that:

1. The worker controls and directs his or her work, not the employer.
2. The work is performed somewhere other than the primary business site and outside of all other places of business of the employer.
3. The worker would not lose income if the employment ended, in other words, they have another primary source of income.

All three requirements must be met in New Jersey, or the worker cannot be classified as an independent contractor and must be paid as an employee.

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An independent contractor generally enjoys far more autonomy than an employee. Independent contractors have the discretion to accept or deny an assignment as they see fit, they may set their own schedule, and frequently will provide their services to more than one company at the same time.

Conversely, employees provide their services at the direction of the employer. Unlike the independent contractor, employees lack the ability to make their own schedule, primarily report to their employer’s place of business during regularly scheduled business hours, and rarely perform similar services for another employer simultaneously.

The two classifications also differ in their tax treatment and overtime treatment. An independent contractor will not have any tax or FICA withholding, unlike an employee. Moreover, independent contractors are paid in accordance with the terms of their contract, and are therefore not entitled to overtime pay. Conversely, employees who are not managers or supervisors are entitled to overtime pay when working in excess of 40 hours in a given work week.

Individuals classified as independent contractors are also not afforded the same benefits as employees, as is demonstrated in Lowman. They receive no employment benefits, such as health and disability insurance. Additionally, independent contractors cannot seek unemployment benefits and also cannot file a workers’ compensation claim if they are injured on the job. They also enjoy far less protection from unfair work practices than an employee and may not avail themselves of state and federal anti-discrimination and workplace safety laws.

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If your employer has misclassified you as an independent contractor, it is possible to correct the classification. The simplest way to do this is simply to talk to your employer.

You can also contact the IRS directly. File form SS-8, which lets the IRS decide whether you are an employee or an independent contractor.

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According to New Jersey law, employees have the right to the following protections and benefits:

• Overtime pay for hours they work beyond 40 hours in a week
• Having the employer pay half of the employee’s Social Security and Medicare taxes
• Hourly pay of at least $12 per hour, as of 2021
• Paid breaks and sick leave
• Workers’ compensation coverage, such that your employer pays for the treatment of injuries you sustain on the job
• Unemployment benefits

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