The general landscape of the American workforce has changed drastically in recent years. In a departure from full-time jobs with benefits followed by a retirement with a pension, many Americans now juggle multiple part-time jobs or gigs in an attempt to provide for themselves and their families. Many workers have to continue to work indefinitely, with no real retirement in sight.
The number of self-employed workers and those classified as independent contractors through the use of a 1099 tax form instead of a W-2 has gone up. Many people are truly self-employed, but others may actually be misclassified in a way that impacts their income and their right to benefits.
Misclassification is just one way that a business can take advantage of its workers and fail to uphold its obligations to the very people who generate its profits. Businesses misclassify workers because it helps them save money but they do so at the expense of their employees. If you believe that your employer has improperly classified you and others as contractors instead of as the employees you are, you may have grounds to bring a claim against your employer in certain circumstances.
How companies benefit from contractor misclassification
Businesses that hire employees profit off of the work done by their staff members. In addition to requiring that workers pay income taxes on their wages, the federal government also collects employment taxes that your employer pays on your behalf. Employees are subject to a broader range of workplace protections, some of which can cost companies money.
From the obligation to provide safety equipment and training to workers’ compensation and health insurance coverage, there are many costs that come with formal employment that employers can shirk by using contractor classifications.
Unfortunately, that means that workers who become injured or sickened through the course of their work may not get to claim workers’ compensation benefits that they should technically receive. It also means that the employees are the ones that end up closing the gap in taxes by paying a higher amount of their total wages in tax.
Warning signs of misclassification
Whether or not you are technically an employee or contractor is somewhat difficult to determine in certain circumstances. The standard is to assume that contractors are independent workers, which means they are not subject to micromanagement of any kind.
Contractors typically also provide all of their own equipment and engage in specific tasks that do not comprise the primary function of the business that has hired them. Employees, on the other hand, use equipment provided by the company and perform a service or task that is critical to the ongoing function of the company.
If your employer tries to dictate when or how you do projects or if your work is a key factor in their company’s performance and offerings, you may be the victim of intentional misclassification.