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Why employers misclassify their workers and how that impacts you

| Dec 4, 2020 | Employment Law |

While many Cincinnati businesses hire salaried or hourly employees to work for them, an increasing number of them have independent contractors handle a lot of their work. Sometimes, employers will also misclassify an employee as an independent contractor.

Why? Well, there are many benefits that your employer derives by hiring independent contractors instead of employees. Bookkeeping and taxes are easier on the employer. Plus, unlike with their employees, employers aren’t required to offer independent contractors things like overtime, medical benefits, workers’ compensation coverage and a minimum wage. But calling someone an independent contractor doesn’t make it so if they’re really an employee.

How does employee misclassification happen?

It’s not uncommon for employers with a large staff to make clerical mistakes when entering a new employee’s misclassification. The same result can happen with smaller employers. In many cases, the owners of those companies are handling everything on their own and they simply don’t understand the legal difference between an employee and an independent contractor.

While there are instances in which clerical errors and inexperience result in employee misclassifications, some companies do it intentionally. Misclassification is most common in career fields such as trucking, housekeeping, construction and home health care, where workers’ compensation premiums are high. Employers often misclassify workers to avoid paying minimum wage or overtime, health insurance or payroll tax payments.

How can misclassification affect you?

There are more downsides to employment misclassification than potentially not qualifying minimum wage, overtime, health insurance or compensated medical care if you’re hurt on the job. 

If a company classifies you as an independent contractor, then they’re not making Federal Insurance Contributions Act (FICA) payments on your behalf. You’re instead expected to make Self-Employed Contributions Act (SECA) payments yourself instead. You could end up with a legal liability issue if you don’t. In essence, you end up shouldering all of the tax burdens — including those that should be your employer’s.

What can you do if a misclassification occurs?

Your employment misclassification can cost you. An attorney with experience in employment law issues can review your situation and help you understand your rights and legal options. If you think you’ve been misclassified by your employer, learn more about how you may proceed with a claim for what you are due.