At least 30 percent of employers in the United States misclassify workers, calling them independent contractors instead of employees for tax and regulatory purposes. Experts estimate that this impacts millions of workers across sectors.
Being misclassified as an independent contractor has a variety of repercussions, from a loss of benefits and employer-made contributions to taxes, to a loss of protection by the Fair Labor Standards Act which protects the right to organize among other things.
Employee classification is dictated by federal law and is characterized by specific guidelines rather than a written agreement between two parties. In this context, a classification as an independent contractor versus a regular employee depends on how much control the employer has over the manner and means of work. In other words, whether the request is to simply complete a task in any way the person sees fit, or whether the paying party is supervising the work and dictating how it should get done.
Even though it is the facts on the ground that matter, employers will still try to save money by converting employees into independent contractors through a written agreement even though none of the other aspects of the relationship change.
Lawmakers are working to improve the situation and to discourage misclassification. One effort is to include employee misclassification as a violation of the Fair Labor Standards Act, which would allow for tough penalties for employers who misclassify.
Employees who are misclassified have a right to fight back and be compensated for lost wages and lost benefits and to compel employers to rectify the situations going forward.
Source: New York Times, “Victims of Misclassification,” Marjorie Elizabeth Wood, Dec. 15, 2013.