Independent Contractor Misclassification
Employers often wrongfully and illegally classify their employees as independent contractors to avoid paying payroll taxes, unemployment insurance, minimum wages, overtime pay, vacation pay, holiday pay, and health insurance. Federal and state laws provide protections for employees who are considered “employees” as opposed to “independent contractors.” Generally, workers are presumed to be employees until an employer can establish that they were correctly classified as independent contractors.
When determining if someone is really an “independent contractor” the most significant factor is whether the person who performs the work is subject to the control of the person for whom the work is provided. For example, does the employer or principal control or have the right to control the worker both as to the work done and the manner in which it is performed. Additional factors that are used to define contractor status, include:
- Whether the person performing the work or services is engaged in an occupation or business distinct or different from that of the employer or principal;
- Whether or not the work is part of the regular business of the principal or alleged employer;
- Whether the principal (i.e., alleged employer) or the worker supplies the tools and equipment required to perform the work;
- The location where the work is performed;
- Whether the working relationship is permanent;
- The degree of skill required to perform the work;
- The alleged employee’s opportunity for profit or loss depending on his or her managerial skill; and
- The method of payment, whether by time or by the job.
In determining whether a worker in an employee or independent contractor, the existence of a written agreement or contract claiming to establish an independent contractor relationship is irrelevant. Similarly, the fact that a worker is issued a 1099 Form, instead of a W-2 Form, is irrelevant in determining independent contractor status.
Industries that frequently incorrectly classify employees as independent contractors include cable television installation companies, technology companies, janitorial companies and contractors, and construction companies.