3 reasons worker misclassification can harm employees

On Behalf of | Apr 7, 2024 | Wage And Hour Claims |

Employees in Kentucky take legal action against their employers for a variety of different issues. Sometimes, a worker experiences harassment or discrimination on the job, and they want to hold their employer legally accountable. Other times, companies may violate certain employment laws, like rules entitling workers to fair compensation based on the time that they worked. Workers frustrated by company policies sometimes decide to take legal action. One of the scenarios that might warrant employee litigation is a claim that an employer misclassified or mischaracterized an employee.

When an employer misclassifies a worker, the company tries to pretend that an employee is an independent contractor. That decision can have several negative consequences for the worker affected which may prompt the worker to take legal action.

Fewer workplace protections

There are several rules that apply in employment scenarios that do not protect independent contractors. Workers’ compensation requirements is one example. Employers generally need to carry workers’ compensation coverage for direct-hire employees but do not provide coverage for independent contractors. Similarly, employees are eligible for unemployment if they suddenly lose their jobs, but independent contractors are not. The loss of those protections may lead to litigation after a worker gets hurt or loses their position.

Issues with wages

Independent contractors theoretically set their own pay, which means that rules about minimum wage and overtime don’t apply to them. Employers who misclassify their workers can pressure independent contractors into working overtime without proper pay or putting any so many hours that they don’t even earn minimum wage. Employees who realize that their pay has become unfairly low might decide they want to take legal action against the employer manipulating payroll and employment records for financial benefit.

Income tax complication

Employers generally withhold funds from every paycheck to make contributions to appropriate tax authorities. Employers also pay certain taxes on behalf of workers because they profit off of someone’s labor. Independent contractors have to save money to pay their taxes. They make estimated quarterly tax payments and also often owe money when they file annual income tax returns. Workers sometimes realize they need to prove that they are employees because of the tax burden that has fallen to them.

A worker misclassification lawsuit could lead to an employee receiving proper classification and a host of penalties for their employer. Learning more about common ways that businesses violate worker rights may benefit those questioning the conduct of a company.

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