Businesses may like to believe that their employees are with them for more than a paycheck and love coming to work each day. The truth is that many people choose to work for a company to receive a fair wage, health insurance and other benefits and protections that a job provides.
However, they may not realize that their employer has misclassified them (either accidentally or intentionally) as an independent contractor. What kind of impact can this have?
A nationwide problem
Employee misclassification happens when an employee is incorrectly identified as an independent contractor. Anywhere between 10-30% of American workers are misclassified, costing this country’s workforce millions of dollars.
Misclassification has far-reaching effects, such as the loss of benefits. Employees often have advantages not available to independent contractors, including overtime pay, health insurance and paid time off.
Independent contractors also don’t have the protections mandated by labor laws. The Family Medical Leave Act (FMLA) assures an employee that their job will still be available if they need to take time off for the birth of a child, an illness or to take care of a family member. Contractors, however, can be terminated at any time.
The Fair Labor Standards Act also protects employees, which ensures they are paid minimum wage and are compensated for working overtime. Both employees and employers contribute to Social Security and Medicare. However, misclassified workers must pay both portions, which doubles their tax burden.
All the advantages that employees enjoy add up. Researchers found that misclassified construction workers lost between $10,177 and $16,729 annually. When looking at the number of years a person spends in the workforce, this is a loss of hundreds of thousands of dollars.
If you believe your employer is purposely misclassifying you, you should contact someone who can guide you through the process and ensure you receive compensation.