Independent Contractor Misclassification

Independent Contractor Misclassification

Independent Contractor Misclassification

The misclassification of employees as independent contractors is a significant problem in the United States.  Employers can save a tremendous amount of money by classifying a worker as an independent contractor instead of as an employee. However, this results in a significant cost for workers. 

Being Misclassified as an Independent Contractor Can Be Costly:

Being misclassified as an independent contractor when you should be an employee can result in tremendous loss for the worker including:

·        Lower earnings

·        Fewer benefits

·        Less job security

·        Loss of tax revenue

·        Potential for depressed wages

What does this mean? Among other things, this could mean that you will be required to pay all your Social Security and Medicare taxes, you will not be eligible for unemployment or worker’s compensation benefits, and you will be disqualified from the minimum wage requirement, overtime pay, sick pay, and healthcare coverage.

Workers Commonly Misclassified:

It’s estimated that independent contractors make up approximately 7-8% of the workforce in the United States. Workers that are commonly misclassified as independent contractors often include, but are not limited to:

  • Cable/Internet installers

  • Car service drivers

  • Caterers

  • Construction workers

  • Delivery drivers

  • Home health workers

  • Hotel/motel staff

  • Janitors

  • Landscapers

  • Nurses

  • Oil/gas workers

  • Security guards

  • Truck drivers

The Department of Labor and Internal Revenue Service (IRS) have labeled worker misclassification as a serious problem. One major reason contributing to this problem is due to the lack of a single rule or test to determine a worker’s status.  

Determining an Employment Status:

In order for workers to be eligible for the Fair Labor Standards Act (FLSA) minimum wage and overtime protections, an “employment relationship” must exist between the worker and the employer. The FLSA defines “employ” as “suffer or permit to work.” Along with this definition the Department of Labor also uses an “economic realities” test consisting of six distinct factors:

  • The extent to which the work performed is an integral part of the employer’s business;

  • The worker’s opportunity for profit or loss depending on his or her managerial skills;

  • The relative extent to which the employer and the worker invest in facilities and equipment;

  • Whether the work performed requires special skills and initiative;

  • The permanency of the worker-employer relationship;

  • The degree and nature of control exercised by the employer.

While these factors are not dispositive, they are important to consider when determining if an independent contractor has been misclassified.

What Can You Do:

Start by talking to your employer to see if they will review your job classification and perhaps, reclassify you as an employee. If talking to your employer didn’t work, get the IRS involved. If you believe you have been misclassified as an independent contractor, you may request that the IRS determine your employment status for federal tax purposes by filing IRS Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and income Tax Withholding. Keep in mind that the IRS may disclose your identity to your employer.

What to do Next: 

If you feel you’ve been wrongly classified as an independent contractor, you can file an individual worker misclassification lawsuit. To learn more about your legal options contact the Tyler Allen Law Firm by filling out the form on this page or call us at 602-456-0545.

employment lawMelanie JorgensenIndependent Contractors, Misclassification