“Shortly after the recession started, we started getting calls from people saying, ‘My employer has shifted me to being an independent contractor,’” said Nicholas Woodfield, principal at [T]he Employment Law Group, a Washington, D.C. law firm representing workers. “The employers, whether they’re intending to or not, are fee shifting the expenses of having a workforce onto the employees and the federal, state and local governments.”
The recession has caused many employers to seek new ways to cut costs, and unfortunately some employers have chosen to misclassify employees as independent contractors. Until the employer is caught, misclassification temporarily saves the employer from
- paying minimum wages,
- paying overtime,
- paying the payroll tax,
- paying worker’s compensation,
- paying unemployment,
- paying social security,
- offering or subsidizing employee health benefits,
- offering paid leave, and
- offering Federal Family and Medical Leave Act (FMLA) unpaid leave.
By misclassifying employees as independent contractors, employers reduce their Federal Insurance Contributions Act (FICA) costs, unemployment contributions, workers’ compensation insurance costs, and benefits contributions. As the result, misclassified employees from restaurant employees to construction workers to even exotic dancers are wrongly denied access to unemployment insurance, workers’ compensation, and other protections, and taxpayers are deprived of tax dollars.
The federal government and each state have tests used to determine a worker’s status and the IRS may even provide a business with their opinion on the classification of a company’s workers. These tests often consider factors such as
- how much control he worker has over how and when to perform work,
- whether the worker is economically independent from the company, and
- whether the worker uses his or her own equipment.
Employers caught misclassifying employees are often subject to severe fines and sued for back pay and benefits by the misclassified employees. Because of the pressure for businesses to cut expenses, undoubtedly employers will unlawfully misclassify, leading to more lawsuits by employees reasserting their workplace rights.
- Fiscal Times Quotes TELG Attorney About Dodd-Frank Whistleblower Provisions (employmentlawgroupblog.com)
- TELG Attorney Quoted on CFO.com regarding Dodd-Frank Whistleblower Program (employmentlawgroupblog.com)
- Tax Tip: Indepedent Contractor vs. Employee (jwchronicle.wordpress.com)