The gig economy is perhaps no longer as popular as it once was, but there are still many people who end up working as independent contractors when what they really want is steady employment. Companies will offer flexibility as a benefit when hiring workers as independent contractors.
Truthfully, many of those classified as contractors by their employers might actually be direct employees according to federal and state law. Companies too often unlawfully misclassify employees as a way of limiting their obligations to those workers and as a means of cutting costs.
Unfortunately, cost-cutting by a business often leads to workers absorbing the risks and expenses associated with those money-saving endeavors. How does worker misclassification potentially lead to economic losses for an affected employee?
1. They won’t receive overtime pay
As an hourly employee or someone with a low salary, the worker in question might receive overtime wages for the work that they do. Overtime wages can be a big boost to someone’s total household income. Contractors don’t receive overtime pay, which can lead to abusive demands by the company that misclassified the work.
2. They don’t have workers’ compensation protection
Every job comes with some degree of risk, from the possibility of a slip-and-fall to the risk of workplace violence. Any employee will generally have the protection of workers’ compensation insurance coverage, but independent contractors are not so fortunate. They either self-insure or take the risk of ending up hurt because of their employment without disability or medical coverage provided by the business benefiting from their labor.
3. They cover taxes the employer should pay
There are certain tax contributions that businesses make on behalf of their workers. Those employment taxes become the responsibility of the individual if they are an independent contractor. Workers will pay more in taxes when they fill out a 1099 instead of a W-2, as they will have to directly pay the amounts that employers would usually cover.
Once workers start to see the financial consequences of their misclassification, they may want to hold their employer accountable. Workers could receive the wages they deserve and can prompt changes to how an organization operates by challenging certain behaviors by the business.
Learning more about common employment law issues benefits workers who are questioning their pay rights or current classification at work. After reviewing basic information about these challenges, workers may also benefit from seeking legal guidance in order to receive personalized feedback and assistance.