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How and why employers misclassify workers

On Behalf of | Nov 18, 2021 | Employment Law For Employees

There are different categories of workers in the U.S., including regular employees, independent contractors, freelancers, and seasonal workers. Employers must classify their workers correctly, or there can be legal consequences.

Unfortunately, workers can ultimately pay the price for misclassification. Therefore, it is crucial to know how and why this happens.

How employers misclassify workers

One form of misclassification generally involves hiring workers as independent contractors rather than employees. This is not an uncommon mistake, as the process of classifying workers as employees or independent contractors can be more complex than people expect.

Several different factors determine whether someone is an employee, including:

  • Who controls the work an individual performs?
  • Who has the right to direct or control the financial aspects of the worker’s job?
  • Whether the worker is free to perform similar services for other companies
  • The amount of direction the worker receives
  • The perceived interactions between the individual and the business

These factors help parties get a better idea of whether a worker is an employee or independent contractor. Still, the fact is that there is room for interpretation and subjectivity. In other words, it is not always obvious.

However, even when someone certainly fits the criteria of being an employee, some employers intentionally misclassify workers.

We must also note another form of misclassification: when the employer classifies an employee as exempt from overtime wages. Under these circumstances, employers can owe employees who are actually non-exempt employees overtime wages.

Why do they do this?

Employers often misclassify workers for financial reasons. Overtime eligibility is one primary reason.

Additionally, hiring someone as an independent contractor means that an employer does not need to pay benefits or withhold taxes. These responsibilities fall on the independent contractor.

But when these workers are subject to the same control and expectations as employees, the employer should be making these payments.

Addressing misclassification claims

Worker misclassification may or may not be intentional, but it is always wrong and can violate workers’ rights.

Employers could face tax evasion charges and penalties for wage and hour violations; workers could experience significant losses in the form of unpaid overtime wages or benefits.

Workers concerned about misclassification should consult an attorney for more information. Doing so sooner rather than later allows employers to correct classification errors voluntarily and minimize the toll misclassification takes on employees.

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The Attorneys of Katz Melinger PLLC