How to Report Misclassification of Employees

Workers can report misclassification of employees to their state and local labor offices, file tax forms, and seek legal help.

What is Employee Misclassification?

“Employee misclassification” refers to employers classifying their workers as independent contractors opposed to full fledged employees.

According to the U.S. Department of Labor, employee misclassification can lead to workers being denied the benefits and protections they deserve. This may include minimum wage, overtime payment, family and medical leave, unemployment insurance, safe workplaces, and other benefits required by the Fair Labor Standards Act (FLSA).

Employee misclassification also causes harm to federal and state governments because it lowers tax revenues.

In some cases, employers misclassify their employee by mistake. However, misclassifying employees allows businesses to save money on labor costs and benefits – prompting some shady employers to purposefully misclassify their workers to cut expenses.

How to Report Misclassification of Employees?

If workers suspect they have been wrongly classified as an independent contractor, the Department for Professional Employees says that they can talk to their employers to see if they can review their employee classification. If the employer refuses to reclassify the worker, they should at least provide an explanation for the independent contractor classification.

One way that workers can report employee misclassification is by contacting their state revenue and labor departments. Many states even provide the option for workers to make anonymous tips about employee misclassification and the various labor law violations surrounding it.

State reporting may be a good option if employers are denying unemployment insurance and worker’s compensation or if they are failing to pay employer withholding taxes. If independent contractor employees are hurt at work or are fired, they may be able to speak to their state unemployment and workers comp offices to see if they are eligible for benefits despite being misclassified.

Another way workers can report employee misclassification is by contacting the Federal Department of Labor Wage and Hour Division. This government office can help if a worker has been misclassified as an independent contractor, is paid less than minimum wage, or is denied overtime pay.

If employee misclassification is causing tax fraud, workers can anonymously report their employers to the IRS by filing Form 3949-A. If workers would like the IRS to make a determination about their worker status, they can file the non-anonymous Form SS-8.

Although these methods can get employers in trouble with state and local authorities, they may not fully help employees recovered unpaid wages and denied benefits.

Can an Attorney Help with Employee Misclassification?

Even if workers report employee misclassification to the proper authorities, they may be able to take further action by speaking to an attorney. If workers are eligible to take legal action against their employer, they may be able to collect unpaid wages and benefits, damages, and other penalties for violations of labor laws.

Unlike reporting to authorities, which gives control of the issue to the government, civil lawsuits against employers are a way for employees to take control of the situation and demand the benefits and payment they deserve.

Join a Free Independent Contractor Class Action Lawsuit Investigation

Even if you are classified as an independent contractor, you may be entitled to minimum wage, overtime pay, reimbursement for expenses, and meal and rest breaks, among other employee benefits.

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This article is not legal advice. It is presented 
for informational purposes only.