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Employee Overview
An employee is a person hired to do a particular job in exchange for a wage or salary and possibly other compensation. Although employees and independent contractors may be doing the same or similar work, these legal classifications have important ramifications for workers. When workers are classified as employees, the company employing them withholds taxes, Social Security fees, and Medicare contributions from their wages. Additionally, employees classified as “nonexempt” are covered by laws including the Fair Labor Standards Act (FLSA), which establishes regulations for minimum wage amounts, overtime pay eligibility, record keeping, and child labor standards.
Independent contractors are not awarded these same rights. Companies who employ independent contractors do not withhold income tax, Social Security, or Medicare from independent contractors’ wages. Independent contractors are required to pay these taxes, fees, and contributions on their own. Additionally, most labor and employment laws do not apply to independent contractors. This means that these workers are not entitled to the same rights and protections as employees.
Other differences between employees and independent contractors include the rate of pay and frequency of pay. Employees are entitled to earn at least minimum wage, and to be paid overtime if they work more than 40 hours a week. Independent contractors are often paid a lump sum per job, rather than a salary or hourly rate. Due to this lack of regulation, independent contractors often make less than the minimum hourly wage. Despite having more flexibility, these workers often sacrifice stability, reliable income, and vacation or sick time.
How are Employee Classifications Determined?
In order to determine whether a worker is an employee or an independent contractor, companies must consider several factors, including:
- Whether the company has the right to control what the worker does and how they do their job
- Whether the company controls the business aspects of the worker’s job, including reimbursement of expenses, or the purchase of supplies and tools
- Whether the worker and company have a written contract
- Whether the work receives benefits including insurance, a pension plan, or paid vacation
- Whether the work is a key aspect of the business
One of the most common misclassified groups are independent contractor truck drivers working for logistics companies and delivery services.
Why Do Companies Misclassify Workers?
Workers at multiple companies may have been misclassified by their employers as independent contractors when they should be classified as employees, and afforded the wage and hour rights associated with that classification. Workers who have been misclassified as contractors may be eligible to hire an experienced attorney and file an employee violations lawsuit.
Companies may be misclassifying their workers for a variety of reasons. Classifying workers as independent contractors may be a way for companies to cut costs and avoid paying workers a fair wage, as well as overtime, sick pay, or other benefits.
The IRS and each state also have tests that may determine a worker’s status for workers’ compensation and unemployment insurance laws. Workers who believe they may have been misclassified can fill out several employee status forms on the IRS website to report their employer.
If you have been misclassified by your employer as an independent contractor when you should be an employee, you may qualify to join a workers’ rights wage violation lawsuit and pursue compensation. Recent wage violation lawsuits have resulted in settlement payouts for workers.
