Misclassifying Workers as "Independent Contractors"
Many companies try to sidestep the law by hiring “independent contractors” instead of employees. Employers can save a lot of money by doing so, even if the workers involved should really be treated as employees under the law.
Employee vs. Independent Contractor
When companies misclassify their workers as independent contractors, these employees are often deprived of many benefits including:
- overtime pay,
- vacation pay,
- health insurance,
- employer-sponsored retirement plans, and
- expense reimbursements.
Misclassified employees also do not receive unemployment and workers' compensation benefits to which they are entitled.
Many employees do not realize they have been misclassified until they have difficulty qualifying for unemployment benefits or their income taxes become due. Instead of receiving a W-2 form, they receive a 1099 form. Furthermore, because the employers did not pay their share of Social Security and Medicare taxes, the employees bear the cost of paying these taxes out of their own pockets.
Who should be considered an employee?
State laws vary, but generally an employee is anyone performing services for an employer where the employer controls what will be done and how it will be done by the worker. What matters is the right of the employer to control the details of how the services are performed.
Who should be considered an independent contractor?
Independent contractors have an independent trade, business, or profession. They offer their services to the public and are generally not employees. However, whether they are employees or independent contractors depends on the facts in each case. The general rule is that an individual is an independent contractor if the employer controls or directs only the result of the work and not the means and methods of accomplishing the result.
For further information about the law, go to the IRS website.
If you believe that you have been improperly misclassified as an independent contractor, and believe you are owed wages, contact us by completing the form on this page or by calling us at (816)714-7100. Please reference that you are contacting us regarding the Independent Contractor investigation.
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