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Why do employers misclassify employees?

by | May 22, 2020 | Employment Law - Employees

Employers commonly misclassify employees. If you’re a worker here in West Virginia, then you may wonder why companies do this and why it matters to you. There are many reasons that employers do this, and they’re often intentional. They do so to keep their operating costs low. They hope that they won’t get caught red-handed doing it.

Most employers that have at least 50 full-time employees are required to provide medical coverage to at least 95% of their workers to remain in compliance with the Affordable Care Act (ACA). This is one of the reasons why smaller companies are quite strategic with how they classify employees. They try to avoid having to pay for health coverage at all costs.

Some employers may classify employees as independent contractors because this allows them to get out of withholding taxes. Companies avoid having to make Medicare or Social Security payments on their employee’s behalf by misclassifying them as well. Employers who have independent contractors on staff don’t have to pay them unemployment or offer worker’s compensation, health insurance, a retirement plan or paid time off either.

Any employer that’s found to have misclassified an employee could be assessed both fines and back taxes for doing so. They could be fined up to 100% of the employment taxes that they owe, have to pay Social Security tax withholdings and also 6.2% for employment tax insurance.

Some employers may purposely have employees work just less than the required amount of hours so that they don’t qualify for full-time employment and the associated benefits.

Employers may also make it seem like an independent contractor doesn’t do the same work as one of their employees when they do. If the Internal Revenue Service (IRS) determines that both the contractors and full-time employees do the same work, then the federal agency will likely deem them as an employee for taxation purposes. Workers whose hours add up to full time but are still being compensated based on part-time employee status also qualify as full-time employees under existing federal laws.

Many workers in Charleston are misclassified by their West Virginia employers, yet they’re unaware of it. You’re probably being deprived of valuable benefits if you have been misclassified. An attorney can review the details surrounding your job and let you know whether you may be entitled to compensation under state or federal laws.

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