Why does is matter if a worker is categorized as an independent contractor, instead of an employee?
Whether a worker is classified as an “independent contractor” or an “employee” makes a significant difference in the amount of benefits available to the worker. Independent contractors often do not receive many of the benefits available to employees, such as overtime, medical benefits, social security credit, unemployment insurance, tax withholding, etc. Some employers classify workers as independent contractors in order to avoid paying them the legally required minimum wage.
Recently, there have been some high profile cases where employers mischaracterized workers as independent contractors. In one such case, a group of FedEx delivery drivers was awarded a judgment of $17.8 Million dollars in damages. In another high profile case, Microsoft agreed to a settlement of $96 Million for improperly treating some of their workers as independent contractors, when they were actually employees.
What is the difference between an independent contractor and an employee?
In order to determine if a worker is an independent contractor, rather than an employee, courts look at several different factors. Some of these factors include:
- The degree of control the employer maintains over how the worker does his or her job.
- The amount of skill required in the occupation
- Whether the employer or worker supplies the tools and place of work
- Method of payment
- Whether the work is part of the regular business of the company
- Whether the parties believe they are creating an independent contractor relationship
While none of these factors are determinative by themselves, courts analyze all of these issues to determine whether an employee or independent contractor relationship exists.
What types of workers are often mischaracterized as independent contractors?
Some industries are known for continuously mischaracterizing their workers as independent contractors. Some examples include:
- Construction Workers
- Delivery Drivers
- Exotic Dancers
- Hospitality Workers
- Computer Programmers
What happens if a worker is mischaracterized as an independent contractor?
An employee in California is entitled to file a lawsuit against their employer for damages caused as a result of being misclassified as an independent contractor. These damages often include all wages and benefits that have been illegally withheld from the employee. While the value of these benefits may seem small on daily basis, over years the value of these benefits that employees are missing out on can easily reach thousands of dollars per employee. In addition, employers can be forced to pay attorney’s fees and the costs of the lawsuit.