Know Your Rights
Independent contractor misclassification is a serious issue that can have far-reaching consequences for workers. It occurs when an employer incorrectly categorizes a worker as an independent contractor, exempt from overtime pay or other benefits, and fails to correctly pay them under the Fair Labor Standards Act (FLSA). This can lead to workers being denied the wages, overtime pay, and other benefits they are entitled to by law. Understanding independent contractor misclassification and why it's such a big deal is vital for all employees.
Tax Implications on a Misclassified Independent Contractor
Independent contractor misclassification can have several severe tax implications for the worker. When an employer misclassifies a worker as an independent contractor, they refuse to pay the employer’s share of taxes and fail to withhold the worker’s share of income taxes. This results in the misclassified independent contractor having to pay both the employer’s and employee’s share of taxes plus any Social Security, Medicare, or unemployment taxes. Being subject to additional taxes reduces the misclassified independent contractor’s overall wages.
In contrast, employees in the same position with the same pay will take home substantially more pay. Misclassified independent contractors are also subject to stricter tax scrutiny, subjecting them to audits, penalties, and other liability. Employers should err on the side of caution and classify all of their workers as employees. Unfortunately, many employers want to reduce their costs and shift the burdens and tax obligations to the workers – this is why independent contractor misclassification is so prevalent.
Depriving a Misclassified Independent Contractor of Benefits
Independent contractor misclassification can also deprive workers of benefits such as health insurance, retirement plans, paid time off, and other workplace protections against discrimination and harassment. Without these protections, an independent contractor’s job is more vulnerable, and their ability to access the healthcare system or accumulate financial savings for the future is compromised.
An employer who misclassifies independent contractors may be liable for back pay, overtime wages, and damages resulting from the misclassification.
Misclassifying Independent Contractors is Against the Law
Above all, it's essential to understand that independent contractor misclassification is against the law. Employers must correctly classify their workers to comply with wage and hour laws and ensure that their employees receive the wages and benefits they are entitled to by law. Taking the necessary steps to ensure that employees are correctly classified can help protect workers from costly fines, penalties, and other legal implications.
Work with the Lawyers For The Workers ®
If you have been misclassified as an independent contractor at work, know you have rights. The nationwide employment lawyers at Josephson Dunlap can help you fight for your rights to your unpaid wages.
Learn more about how we can help or schedule a free consultation by calling (888) 742-7242 or visiting our website.