Most employees are covered by various employment laws that provide protections and benefits including unemployment insurance, workers’ compensation insurance, certain tax contributions, minimum wages, and overtime pay. Since these laws only apply to employees, many companies misclassify their employees as independent contractors to avoid the costs and responsibilities.
If a company withholds taxes from your paycheck and issues you a Form W-2 each year to report your wages and taxes, they are treating you as an employee. If, instead, you do not have taxes withheld and you are issued a Form 1099, you are being treated as an independent contractor—at least for tax purposes. But just because a company issues you a 1099 does NOT necessarily mean you are truly an independent contractor for purposes of various employment laws. Even if you signed an agreement stating that you would work as an independent contractor, not an employee, you may still be misclassified under certain employment laws. Particularly, if the company misclassifies you and does not pay overtime when you work more than 40 hours a week, you may be owed overtime pay.
If you believe you may have been misclassified, you should seek qualified legal guidance. Our independent contractor misclassification lawyer can help you explore your legal options if you believe you have been unfairly denied overtime pay. Our team at Fair Labor Law may be able to recover compensation for unpaid wages, unpaid overtime, and other money damages.
Read below for more information about how to tell whether you have been misclassified as an independent contractor.
How do you know whether you have been appropriately classified as an employee or independent contractor? Unfortunately, the answer is not always cut and dried. An attorney with experience in the nuances of this area of law would need to review all of the facts of your particular situation. But we provide a summary here of the relevant analysis.
Different state and federal laws use different tests that consider various factors in order to determine whether an individual should be considered an employee or independent contractor. For purposes of federal overtime law, a true independent contractor has a certain level of autonomy such that they can fairly be considered to be in business for themselves. A company may hire them to provide a specialty service outside of the employer's realm of expertise. True independent contractors typically market their services or make themselves available to many different companies, or to the general public.
An employee, on the the other hand, depends on one or just a few employers for their livelihood. An employee might have a highly skilled job, but still work under closer supervision by the company than an independent business would.
Below are some more detailed factors that judges and juries are supposed to consider in order to determine employee vs. independent contractor status under the federal Fair Labor Standards Act.
Some factors that indicate independent contractor status under the federal Fair Labor Standards Act include:
- The individual controls how the work is to be accomplished and works with little supervision or direction;
- The individual has made significant investments in the business;
- The individual has a significant opportunity for profit or loss depending on how they manage their business;
- The nature of the work requires a unique skill set or exercise of significant initiative within the business; and
- The individual works for many different companies and for relatively short periods at a time.
On the other hand, factors that indicate employee status under the federal Fair Labor Standards Act include:
- The individual is subject to relatively close control and supervision by the employer;
- The employer’s investments in the business are much more than the individual’s investments;
- The individual has little opportunity for profit or loss because the employer controls the schedule and pay;
- The individual works for the same company for an extended period;
- The nature of the work is routine, even if specialized, and does not allow much initiative within the business; and
- The work is an integral part of the employer’s business.
This area of law is very complex. In most cases, some factors point one direction while other factors point another direction, making it difficult to predict how a case may come out. Some states use different tests under their state overtime laws that are more likely than federal law to result in finding employee status.
When an employer mistakenly or intentionally misclassifies you as an independent contractor, they in effect deny you what you are owed. Remember, as an independent contractor, you may not be entitled to receive compensation for overtime, meal breaks, or rest periods. Your wages may also be subject to the self-employment tax, and you may not be reimbursed for expenses you incur in the course of performing your job.
If you realize you may have been misclassified as an independent contractor, you will need to take decisive steps to protect your rights and recover lost compensation. You have the right to file a lawsuit against your employer and recover compensation for unpaid wages and additional money damages. The Fair Labor Standards Act has a default statute of limitations (deadline to file) of two years, which can be extended to three years upon a finding of a willful violation. This means that if you have been denied overtime pay beginning two years ago or more, you may be losing part of the unpaid wages you could claim with each two-year anniversary of a paycheck that passes.
Our firm’s services include comprehensive litigation support, and our independent contractor misclassification lawyer at Fair Labor Law can provide you with the knowledgeable representation you need to succeed. We will work to efficiently advance your claim and seek the maximum compensation available to you in your case.
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