Our employment law attorneys represent employees misclassified as independent contractors and companies facing misclassification claims by part time or non-employee contractors. If you are an employee but your employer is not deducting taxes appropriately, or is paying you as though you are a contractor with no overtime even though you are a full time employee, they are probably breaking the law. Our attorneys can help individuals misclassified employees that are paid as contractors illegally because their boss wants to avoid paying taxes, wages, and providing health and medical benefits required of them by law.
Do You Qualify? – 866-262-1553
Call now to schedule a consultation with an independent contractor misclassification lawyer at Baron & Budd. We have extensive experience in employment law cases and can help you get all of the benefits and overtime pay provided for you as an employee by federal law.
The Changing Landscape for Independent Contractors
With the advent of laws like the Affordable Care Act (ACA) and other attempts to level the playing field for independent contractors, more and more individuals are leaving the W-2 rat race and going into business for themselves. While an independent contractor relationship that is freely and knowingly entered into by both parties can be mutually beneficial, in some cases, unscrupulous employers can take advantage of employee classification and labor laws by misclassifying workers as independent contractors in an attempt to avoid providing benefits or paying lawful wages.
Employers found guilty of this type of behavior can face steep civil penalties under both federal and state laws. If you think you have been misclassified as an independent contractor when you are in fact an employee, we can help. Read on to learn what working arrangements define a worker as an employee versus and independent contractor, and what federal and state enforcement options are available for you and other misclassified workers.
Have you lost money because of misclassification as a contractor, but you are actually an employee?
When employers intentionally misclassify workers as independent contractors, they are usually motivated by money. When companies misclassify employees as contractors to save money, you (the employee) lose money and many other benefits protected by federal law.
A misclassified employee paid as a contractor is typically not paid the overtime they deserve for working over 40 hours a week. Employers and supervisors make excuses, alleging that you are a salary employee and exempt from overtime pay. However, the Fair Labor Standards Act classifies exempt employees that are not eligible to receive overtime pay as high-level workers such as executives, upper management, engineers, developers, engineers, and other skilled employees that make more than $47, 475 per year.
What do employees paid as hourly workers lose when misclassified?
Workers that are misclassified as contractors lose all of the benefits and employee protection afforded to them by federal law. If you are misclassified as a contractor, some of the things you are losing include:
- Overtime pay
- Right to employer subsidized healthcare benefits
- Paid vacation, paid holidays, and sick pay
- Employer contributions to your social security
- Employer contributions to Medicare
- Eligibility for unemployment benefits
- Some anti-discrimination & harassment protection
- Entitlement to minimum breaks
If you are being paid as a contractor but are an employee, don’t let them brush it under the table. You deserve to be paid fairly and protected by US employee rights protection laws. We highly recommend that you contact a lawyer for employees misclassified as contractors to get the pay, healthcare, and other benefits owed to you.
Employees Commonly Misclassified as Contractors Include:
- Restaurant supervisors
- Construction workers
- Delivery drivers
- Restaurant servers, bussers, kitchen staff
- Bartenders, bar backs, waiters
- Manufacturing plant workers
- Retail workers
- Sales reps
- Secretaries and Administrative Assistants
- Dental Assistants
- Fast Food Workers
- Painters, tile workers, and remodeling workers
What are the differences between an independent contractor and an employee?
Under federal law, contract workers serve a different role than employees, and regardless of the specific designation put into place by an employer or HR department, the federal factors will control. In order for a worker to be an independent contractor, he or she must:
- Be able to exercise discretion and control over when and how work is performed; and
- Be able to freely enter into and leave employment.
This means that if an employer attempts to dictate a worker’s hours, prevent the worker from accepting contract work from other employers, place controls on the employee’s ability to quit the job, or control how the work is performed (not simply the end result), an employer-employee relationship is more likely than a contract one. Most state laws mimic the federal ones on the definition of independent contractor versus employee, although the specific interpretation of factors like “control and direction” can largely rest at the discretion of the eleven federal district courts of appeal.
What are the differences between exempt and non-exempt employees?
Even if a worker is rightfully acknowledged to be an employee, misclassification can still take place. Under federal law, most notably the Fair Labor Standards Act, employees who are classified as non-exempt employees who don’t perform professional, administrative, or ministerial functions as part of their job are entitled to overtime pay for hours worked in excess of 40 per week.
On the other hand, exempt employees are paid a flat salary (although this can still be based on an hourly rate) but may be required to work far more than 40 hours per week for no additional pay. Some employers may attempt to misclassify non-exempt employees as exempt, even providing false titles like “manager,” to avoid paying overtime pay — often resulting in the employee earning below minimum wage for the number of hours worked.
In general, for an employee to be considered exempt from overtime pay under federal law, he or she must perform the following functions:
- Exercise independent judgment in the performance of job duties; and
- Spend the majority of the workday performing tasks that require independent thought (rather than repetitive or scripted tasks).
This can sometimes be a nuanced determination that depends on the actual duties of the job at issue. For example, a call center representative who reads from a script and passes along callers to technicians who can actually provide them with help may be a non-exempt employee, while the same call center representative who is permitted to engage in problem-solving tasks or adjust billing statements on his or her own may rightfully be considered exempt at times.
What are the penalties for employee misclassification?
Because misclassification can be seen as an attempt to defraud both the affected employee (through the deprivation of overtime pay and/or employee benefits) and the federal and state governments (through the failure to pay the employer’s portion of Social Security taxes and workers’ compensation insurance), it’s treated seriously under both federal and state law.
Some of the specific penalties for employers that misclassify workers as independent contractors include:
- “$50 for each Form W-2 that the employer failed to file because of classifying workers as an independent contractor.
- Since the employer failed to withhold income taxes, it faces penalties of 1.5% of the wages, plus 40% of the FICA taxes (social security and Medicare) that were not withheld from the employee and 100% of the matching FICA taxes the employer should have paid. Interest is also accrued on these penalties daily from the date they should have been deposited.
- A Failure to Pay Taxes penalty equal to 0.5% of the unpaid tax liability for each month up to 25% of the total tax liability.
If the IRS suspects fraud or intentional misconduct, it can impose additional fines and penalties. For instance, the employer could be subjected to penalties that include 20% of all of the wages paid, plus 100% of the FICA taxes, both the employee’s and employer’s share. Criminal penalties of up to $1,000 per misclassified worker and 1 year in prison can be imposed as well. In addition, the person responsible for withholding taxes could also be held personally liable for any uncollected tax.”
Much like the EEOC is responsible for enforcing anti-discrimination laws, the federal Department of Labor’s Wage and Hour Division (WHD) is charged with enforcement of the Fair Labor Standards Act and related wage and hour laws. Before filing a complaint in federal court to get back pay and compensation for misclassification, you may be required to go through the WHD’s conciliation process to see if there’s an alternative path to resolving your complaint. Some employers may opt to settle a claim at the WHD level rather than defending it in court; others may refuse to participate in the process and make the decision to file easier.
Contact an Attorney for Employees Misclassified as Contractors
Do You Qualify? – 866-262-1553
Call Baron & Budd today to schedule a consultation with our employment law attorneys for misclassification claims. You may be entitled to 3 years of unpaid overtime pay and more compensation for other benefits and employee rights lost.