Why your employment classification matters to you as a worker

On Behalf of | Dec 27, 2022 | Wage And Hour Claims

As an employee, you have certain rights under the law. And, the nature of your employment arrangement determines those protections. The average worker has the right to certain wage expectations, including receiving the state’s minimum wage and also overtime pay. They have many other benefits that come from their employment relationship.

Companies often want to minimize how much it costs them to keep workers on the payroll. Misclassifying an employee as an independent contractor is a common way for a business to reduce how much it costs them to hire someone new. Many workers at first think nothing of the request to be called independent contractors, but then later realize the issues involved, including the following:

They don’t receive appropriate pay

An independent contractor might end up putting in so many hours on a project that the compensation they receive works out to less than minimum wage when broken down into an hourly rate. They might do all of those extra hours of work without overtime compensation. Independent contractor classification often denies a worker certain pay protections afforded to employees.

They don’t have employer coverage

Businesses have to provide certain kinds of protection for employees. Workers’ compensation coverage and unemployment insurance are both mandatory for employers in many cases. However, there is no requirement to provide such protection for independent contractors. These workers who get hurt on the job or suddenly fired may not have the basic protections that other employees do in such situations.

They have surprise tax obligations

One of the practical issues that directly relate to a company classifying a worker as an independent contractor is that the employee becomes responsible for keeping enough money from each paycheck to pay taxes.

Not only will they have to pay instead of receiving a refund with their annual April tax return, but they will also have to make estimated quarterly taxes every year that they remain an independent contractor. Those who make mistakes with their financial planning could end up responsible for thousands of dollars in income tax payments.

Understanding your employment law status and corresponding laws can help you better assert your rights as a worker.

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