In recent years, the job market has veered into uncharted territory. With the growth of the "gig economy," many workers increasingly handle minor tasks such as providing ridesharing through companies like Uber and Lyft, delivering food through services through DoorDash and Grubhub, and even providing grocery shopping services.
There are advantages and disadvantages to being an employee or independent contractor. You typically have more stability in your employment, access to benefits, and regular income. Nonetheless, you often have less control over your work schedule and perhaps fewer options for the kinds of employment you can perform. As an independent contractor, you have more control over your work schedule and possibly more freedom over the kinds of work you can perform, but you also lack access to benefits and job security.
In this article, AAL will discuss some of the laws governing the distinctions between employees and independent contractors, why those distinctions matter, and what damages and compensation you may be entitled to if your employer has misclassified you as an independent contractor.
Because employees are entitled to significantly more rights and protections under state and federal laws and are much more expensive for employers, misclassifying workers as independent contractors to achieve significant cost savings at the expense of those who work for them has unfortunately become a common practice.
Minimum wage and overtime compensation. Under the Fair Labor Standards Act (FLSA), employees must generally be paid a minimum wage (currently $7.25 per hour) and overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.
Workers’ compensation benefits: Most employees must obtain workers’ compensation insurance covering each of their employees. Furthermore, in the case a worker is injured, even if the employer has workers’ compensation insurance, their policy may have deductibles, co-pays, and other out-of-pocket costs that are not covered--not to mention that the employer’s premiums may increase. While you may be able to sue the person you were working for as an independent contractor under certain conditions if you are injured while working for them, the damages you can be awarded if you win can be much less than those an employee will be entitled to.
Personal liability: One of the significant distinctions between an employee and an independent contractor is that in traditional employment relationships, the employer will be liable for damages caused by their employees when acting in the scope of their employment under the legal concept of “respondeat superior” which is a form of vicarious liability. Vicarious liability (also referred to as “imputed” liability) means that one person can be held responsible for the acts of another. That said, sometimes employees may be liable, such as in cases of intentional or reckless misconduct.
By contrast, independent contractors will be liable for accidents and other claims arising from their work. Furthermore, in situations where liability insurance is required, independent contractors are responsible for procuring and maintaining their own coverage. It bears mentioning, however, that there are cases where both the employer and an independent contractor may be vicariously liable for a contractor’s work, such as where specific duties of care may not be delegated to another on grounds of public policy (for example, hospitals have a non-delegable duty to ensure that their patients receive adequate medical care, and therefore even if the hospital contracts with a third-party provider to provide medical services, the hospital is still responsible for ensuring that the patient receives the necessary care), or if the employer was negligent in hiring the contractor (for example, if the employer neglected to verify that the contractor had all the appropriate insurances or certifications to perform the task they were hired for)
Tax-related disadvantages: Under the Internal Revenue Code (IRC), independent contractors are responsible for paying both the employer and employee portion of Social Security and Medicare (FICA) taxes, which can add up to 15.3% of their income, in contrast to employees, who have these taxes automatically deducted from their paychecks, with their employer contributing an additional 7.65%. Furthermore, complying with tax laws is a lot more burdensome for independent contractors for a number of other reasons.
Health insurance and unemployment benefits. Under the Affordable Care Act (ACA), employers with 50 or more full-time employees must provide health insurance coverage to their employees at the federal level, and states may have lower thresholds. While most private-sector employers are generally not required to provide unemployment benefits, these may be required under state law. On the other hand, independent contractors are generally not eligible for these benefits.
An employer cannot simply avoid their obligations towards their employees by including clauses in their contracts defining them as independent contractors. Federal and state laws have various factors which will support one classification over the other, and will be used to ultimately determine which classification should apply to a given work arrangement.
Factors that would support an employee classification include:
Conversely, factors that will tend to support an independent contractor include:
If you have been misclassified as an independent contractor, you may be entitled to various forms of compensation, including:
A skilled attorney with extensive Employment Law experience can zealously advocate on your behalf in order to get you the best possible outcome for your case and achieve justice for the losses that you have suffered. Using their legal expertise and trial tactics, and by employing expert witnesses as necessary, your attorney will be able to gather evidence of your misclassification and present that information in the most compelling way for your case.
Through AAL, you can find a number of experienced and dedicated attorneys who can help you seek the justice you deserve.
*Disclaimer: Attorney At Law does not represent all lawyers in all states. There may be differences of opinion. It’s always advisable to consult with an attorney when in a legal situation.