Independent Contractor Misclassification
Companies often misclassify employees as independent contractors to avoid paying them the wages and benefits the law requires. While this is often seen in industries like trucking and the gig economy, many other types of workers are misclassified.
Independent Contractor vs. Employee
The issue of whether someone is an independent contractor or employee is largely a question of economic reality. Is the worker economically dependent on the business which he or she serves? The courts also look at the following criteria:
- The extent to which the services rendered are an integral part of the principal’s business.
- The permanency of the relationship.
- The amount of the alleged contractor’s investment in facilities and equipment.
- The nature and degree of control by the principal.
- The alleged contractor’s opportunities for profit and loss.
- The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
- The degree of independent business organization and operation.
Companies often use misclassification not only as a way to avoid paying minimum wage and overtime, but as a means to take deductions out of workers’ pay for things that an employer would typically cover, such as fuel for a truck. But they often reach further into workers’ pockets to deduct things like commissions and service charges, housing expenses, portfolios and photographic services, visas, transportation and travel. Companies may also require workers classified as independent contractors to sign exclusive multi-year contracts that prohibit workers from obtaining other work and contain oppressive terms, such as a power of attorney clause, giving a company the ability to negotiate rates of pay, deposit checks and deduct expenses on behalf of a worker.
Workers who are found to be misclassified are entitled to minimum wage payments for all hours worked in the weeks they did not earn the minimum wage, and in most non-trucking cases, overtime at the rate of time and a half for hours over 40 in week (with some exceptions). Workers who recover unpaid wages may also be entitled to an equal and additional amount of damages called liquidated damages.
We can help
If you believe you may have been misclassified as an independent contractor but treated as an employee, call us at 845-255-9370. We look forward to speaking with you.