When a company hires someone, it must decide whether that person will be classified as an employee or as an independent contractor.
Some of the factors used in making this determination include:
-Employee:
– Employer decides required hours of employment
– Employer dictates working conditions and policies
– The employer supplies necessary tools and materials for the work
– Employer mandates a certain type of dress, such as business casual requirements or even uniforms
-Independent contractor:
– Sets their own work hours
– Decides their own working conditions
– Supplies their own tools and materials
– Decides on their own dress
The main question to consider when classifying workers is how much control the company has over the worker. The more control the company has, the more likely the worker should be classified as an
employee, and vice versa. How employers classify their workers has a significant impact on both the worker and the company, as employees are treated differently under the law than independent contractors. Some key differences include:
-Employee:
– Employer deducts payroll taxes
– Employer provides workers compensation insurance
– Employer must follow wage and hour laws
– Protected by anti-discrimination laws
-Independent Contractor:
– Pays own income taxes
– Not entitled to benefits
– Does not receive worker’s compensation for injuries suffered on the job
– Not protected by anti-discrimination laws
Companies may misclassify workers as independent contractors in order to avoid having to follow labor and anti-discrimination laws. However, if a person truly is an employee, they should receive all the benefits and protections they deserve under the law. Misclassification of employees in an attempt for companies to save money has been at the center of many employment law cases in recent years.
New legislation proposed
Late in 2013, Senator Bob Casey proposed new legislation entitled the Payroll Fraud Prevention Act of 2013. The bill aims to provide protections to independent contractors and to make it unlawful to misclassify workers. If it passes, the new law would amend the Fair Labor Standards Act (FLSA) to require that companies accurately classify workers and provide notice to all workers regarding their classification and their rights. This notice must be provided to both employees and independent contractors and must contain the following three pieces of information:
· How they are currently classified;
· Contact information for the Department of Labor;
· Notice of their rights to contact the Department of Labor if they believe they have been improperly classified.
Legislators hope that these new requirements will help educate workers on their classification and their rights to question the accuracy of that classification. The law would further prohibit any retaliation against a worker who exercises those rights. If you believe you have been wrongfully classified or have any other question regarding this issue, contact the office of HKM Employment Attorneys for assistance.
