What to Do If You’re Misclassified as an Independent Contractor

Employers have a strong financial incentive to use independent contractors as workers rather than employees; however, they cannot manage or control an independent contractor the way they can with an employee. Under federal and state employee protection laws, an employer may not treat you as an employee and then misclassify you as an independent contractor to take advantage of the financial benefits.

What can you do if an employer oversees all aspects of your work as though you are an employee but classifies you as an independent contractor to benefit themselves at your expense?

What Are an Employer’s Advantages When Using Independent Contractors?

Employers save money by classifying a worker as an independent contractor. Using an independent contractor has the following advantages:

• Reduces an employer’s payroll costs
• Saves the employer from having to contribute half of the worker’s Social Security and Medicare taxes
• They don’t have to provide benefits like medical insurance, retirement plans, or family medical leave
• The employer doesn’t have to pay for unemployment insurance or workers’ compensation insurance
• The employer does not have to pay overtime costs or meet minimum wage requirements

Some employers have an additional incentive for using independent contractors. For instance, rideshare companies and large online retailers use independent contractors as drivers to protect their companies from liability for traffic accidents caused by their drivers.

What Are the Disadvantages of Being Misclassified as an Independent Contractor?

Some workers prefer the independence of being an independent contractor rather than an employee; however, when an employer exerts control over all aspects of your workday, they essentially treat you as an employee while misclassifying you as an independent contractor. This leaves you working in a position like an employee, but with the following disadvantages:

• You may have to work overtime hours without overtime pay
• You don’t have access to healthcare and retirement benefits
• You lack paid sick leave or family medical leave
• You aren’t eligible for workers’ compensation after an injury or unemployment benefits if the work is terminated
• You have to pay taxes for Medicare and Social Security in their entirety

An employer is responsible for determining whether a worker is an employee or an independent contractor, but under the Fair Labor Standards Act (FLSA), an employer commits misclassification if they treat a worker as an employee while enjoying the benefits of classifying them as an independent contractor.

Have I Been Misclassified as an Independent Contractor?

Under FLSA guidelines, you should be treated as an employee with all of the accompanying advantages under the following guidelines:

• If you are working for someone else’s business rather than your own
• You only earn more by working extra hours rather than by increasing profits
• You use the employer’s tools and resources rather than supplying your own
• You only work for one employer rather than having multiple clients
• The employer assigns the work and decides how and when it will be done, rather than you choosing what projects you’d like to take and how and when you’ll do the work

Employers and employees can analyze and accurately assess a worker’s status by consulting FLSA regulations under 29 CFR Part 795.

What Do I Do If I’ve Been Misclassified as an Independent Contractor?

If you believe your work circumstances indicate that you should be treated as an employee but your employer classifies you as an independent contractor, you have legal options. First, discuss the situation with your employer and tell them that you believe you should have employee status, especially if coworkers perform similarly and are considered employees. You may also consult with the IRS and request an IRS review of your employment circumstances for tax purposes.

You may also file an unemployment or workers’ compensation claim if you’ve been let go from your position or suffered a workplace injury. These agencies investigate claims when a worker states that they have been treated as an employee but were misclassified as an independent contractor.

If your employer fails to make the appropriate changes to your workplace status, it’s time to speak to an experienced Orange County employment lawyer who can demand accountability on your behalf through a strategy that aligns with your goals. Contact us at (949) 380-0900.