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Employee Misclassification: How Do I Know If I’ve Been Misclassified by My Employer?

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January 9, 2023

Employee misclassification takes place more often than anyone can imagine. While many employers are honest and outright regarding employee pay and taxes, others may not be so forthcoming.

In an effort to save money and avoid paying taxes, some employers misclassify their employees as independent contract workers and not as regular employees. Many employees have no idea they have been misclassified leave alone the effects misclassification has on their final paycheck.

What Is Employee Misclassification?

Employee misclassification occurs when an employer deliberately or mistakenly classifies a worker as not being an employee but instead labels them as independent contract workers. This happens when the worker provides services for pay and is subject to control by the employer in most aspects of their job. An example of this type of misclassification can be found in many industries, from retail to medical.

Determining whether you’re a regular employee or an independent contractor is important as it determines your tax liability and how you are paid. The classification of employees impacts your paycheck, benefits, and taxes. It’s important to know what category you fall into and whether or not you’re being misclassified by your employer.

While most employers don’t misclassify their employees purposely, it usually doesn’t matter in the eyes of the law. Every employer has an obligation to pay their employees appropriately and according to the law.

How Can I Tell If I Have Been Misclassified?

Employee misclassification can be difficult to recognize and identify. To help out, the courts have come up with a process to help determine whether an employee is an independent contract worker or a regular employee. Factors that can help you determine whether you’re an employee or a contractor are determined by the level of control within the work setting. These include:

Behavioral Control

The first sign you’re an employee and not a contractor is when your employer has a great deal of control over how you do your job. This includes providing instructions on the details of how the job should be done, dictating when and where work is done, as well as providing equipment to do the job.

Independent contractors have more control over when and how they complete a job.

Financial Control

Another factor that can help determine employee misclassification is the amount of financial control an employer has over a worker. Regular employees are usually paid by the hour or salary. Independent contractors often set their own rates and negotiate payment terms with their clients.

Independent workers make profits and experience losses on their own. They make significant investments in equipment and incur their own expenses to get the job done.

Relationship of the Parties

Generally, employers and employees have an agreement that lasts more than a short period of time. They are required to follow certain laws, such as minimum wage law and workers’ compensation laws.

Independent contractors have a much different relationship with the business they work for and generally complete a single job. They are not obligated to follow the same laws as regular employees but may be subject to certain taxes depending on their earnings.

Some questions you should ask yourself to determine whether you’ve been misclassified include:

Does your employer dictate when, how, and where you do the job?
Do you have a supervisor at your job site?
Are you paid by the hour and expected to work for a certain number of hours per week?
Are the tools and equipment you use provided by your employer?
Are the work you perform an integral part of your employer’s business?
Do your duties benefit the employer on an ongoing or permanent benefit?

What Should I Do If I’ve Been Misclassified?

The first thing to do if you find out that you’ve been misclassified as a contractor when you do your job as an employee is to understand your rights under the Fair Labor Standard Act (FLSA). All regular employees are entitled to overtime wages and other employee benefits. The law under the FLSA determines that workers be paid up to three years of denied wages.

It is important to remember that if you were misclassified and not paid fairly, then you may have a legal case against your employer. Don’t hesitate to consult an experienced employment law attorney who will be able to advise you on the best course of action.

Contact Josephson Dunlap LLP with MyBackWages to book a free consultation. Our attorneys have experience representing employees who have been misclassified and are familiar with the laws surrounding employee misclassification.