When Is a Worker Misclassified as an Independent Contractor?
Many employers, from such large multi-billion dollar companies such UPS or Fed Ex, to smaller single location companies choose to classify workers who solely perform work for them, as “independent contractors.” Why? Because they can refuse to provide benefits employees receive such as insurance, pension or 401k, workers compensation, unemployment insurance and wages, and mainly because it saves the company huge sums of money and creates more profits, including lowering the payroll taxes and medicare taxes.
Even more so, they can argue and fight claims for violations of the state and federal wages laws, civil rights, and ERISA claims and other “wrongful termination” claims. Our employment law attorneys at Feldman Williams, PLLC call this “misclassification”, and sometimes it is willful by the employer and sometimes just a mistake. Regardless, the FLSA and minimum wage laws do are their to protect the employees in either situation.
Determination of Independent Contractor Status
The employer who has an employee execute an “independent contractor agreement” and treat them as a 1099 worker does not satisfy the IRS regulations or the FLSA or state minimum wage laws. Courts, and the IRS weight numerous factors to determine whether a worker is properly classified as an independent contractor. These factors typically involved analysis of the following: (1) the degree of control exercised by the employer over the workers; (2) the workers’ opportunity for profit and loss and the workers’ investment into the business; (3) the workers’ investment into tools and materials; (4) the degree of specialized skill and independent initiative required to perform the work; (5) the duration of the working relationship; and (6) the extent to which the work is an integral part of the employer’s business, (7) the ability of the workers to perform work for others, alter or change their schedules or accept or decline assignments.
Common Industries that Misclassify Workers as Contractors
Companies throughout the U.S., big and small, have been found to have misclassified workers as independent contractors and been found liable for both minimum wage violations and overtime wage violations. Industries where this issue has been prevalent in the past decade include:
- Cable installers
- Exotic dancers
- Sales representatives (insurance)
- Delivery drivers
- Personal transportation (Uber drivers)
- Maintenance/cleaning crews
- Landscaping crews
- Staffing companies
- Healthcare workers
- Hair stylists
- Marketing representatives
Find Out if You Were Misclassified as an Independent Contractor
If you were misclassified as an independent contractor, you may be entitled to recover between 2 and 3 years of overtime wages, up to 5 years of minimum wages, and an equal sum in liquidated damages. You may also be entitled to the lost value of fringe benefits not offered or provided. Contact an employment law attorney at Feldman Williams, PLLC to get a free analysis of your employment status.