There are a lot of different types of work arrangements. Some companies may exclusively hire employees. Others may have a hybrid of independent contractors and salaried workers. These are just two of many different employment scenarios that exist.
How your employer classifies you impacts your worker rights, including how much you receive for the work that you perform. Your employer’s misclassification of your employment status isn’t only unlawful but can also be costly for you.
How your employer’s misclassification of you affects you financially
Employers must generally take certain deductions out of an employee’s paycheck, whereas independent contractors have to pay self-employment taxes that cover those mandatory obligations themselves.
Most employers accurately classify workers as either an employee or contractor. Some don’t because they don’t want to invest the time in sorting out deductions. Others misclassify workers because they don’t want to pay minimum wage or overtime. They may also misclassify an employee to get out of paying benefits like workers’ compensation, annual or sick leave or health insurance. An employer can save significant operational costs by misclassifying employees — and that passes the expense on to the affected employees (like you).
Federal and state taxation authorities expect you to make Self-Employed Contributions Act (SECA) payments on any income that you generate as a contractor. Existing laws may require you to maintain health insurance. You must either pay these burdens or expose yourself to financial or legal liability for not doing so. While some of these expenses can be tax write-offs if you’re a contractor, they might not be enough to help.
What to do if you’re the victim of misclassification
One of the worst situations that can happen is if you’re under the impression that your employer classified you as an employee, yet find out down the road that they really had you in their system as an independent contractor instead. A wages and hours claim attorney will want to learn more about your work situation and review your pay stubs and tax records before advising you of your rights in your case.