Employers sometimes misclassify workers as independent contractors rather than employees. The misclassification can take place because of not fully understanding employment law or simply because it’s cheaper to hire someone who doesn’t fall under state and federal wage, hour, overtime, and workers’ compensation laws.
When a business hires an independent contractor, the compensation can be set below minimum wage and overtime laws, and the employer does not have to pay any state, federal, unemployment, or Social Security taxes. The employer also does not have to fund workers’ compensation or any other benefits for that person.
The U.S. Department of Labor (DOL) has established guidelines for determining when a worker is an employee and when he or she is an independent contractor. The department has been known to step in to correct matters when the abuse is widespread.
A few years ago, the DOL won a judgment against Fairfield, Ohio-based Cascom Inc., an installer for residential cable, internet, and telephone services, for violating federal law regarding worker classification. The DOL at the same time signed a memorandum of understanding (MOU) with the Internal Revenue Service (IRS) to share information about companies who have violated worker classification rules and avoided taxes.
If you’re a worker in or around Akron, Ohio, or in neighboring Hudson, Canton, Cleveland, or Lorain, and you feel you’ve been cheated out of your deserved wages due to misclassification as an independent contractor, contact the Law Offices of F. Benjamin Riek III. Attorney F. Benjamin Riek III can evaluate your situation and work with you to recover the money owed to you through recognized legal avenues.
An independent contractor is not covered by the federal Fair Labor Standards Act (FLSA), which establishes minimum wage and overtime standards, enabling an employer to cheat the system, so to speak, by basing compensation on standards lower than the law requires for employees covered under the FLSA. The employer thus gains an advantage over their competitors because wages are lower.
The employee misclassified as an independent contractor may thus face lower compensation than he or she deserves. Independent contractors will also not be covered by workers’ compensation or be able to receive any unemployment benefits if let go.
From an employee’s standpoint, misclassification represents both a loss and an obligation: a loss because wages and benefits may be shorted, and an obligation because he or she then becomes responsible for any taxes owed and has no protection against injuries at work or job loss.
The state and federal governments also don’t receive the taxes due to them for income, Medicare, Social Security, and the unemployment insurance (UI) fund when employees are misclassified.
If you hire a plumber who works on his own to come and fix a pipe at your business, that person is an independent contractor who sets his own rates for work done and then pays his own taxes and liabilities. If you, a business owner, hire someone to be an on-site plumber who takes care of issues at all the varied locations of your operations, and that person works only for you, that person is most likely an employee.
Here is how the Department of Labor separates the independent contractor from the employee:
Independent contractors run their own businesses. They are paid project by project. They provide their own tools and equipment for the task at hand. They work with multiple clients. They have only a temporary relationship with you until the work is completed. They decide when and how to do the work, and they decide if they even want to do the work.
Employees, on the other hand, are just about the opposite. For one, they work for someone else’s business, usually on a full- or part-time basis. They are usually paid hourly, by salary, or by piece rate. They use the employer’s tools, equipment, and materials. They typically work for one employer in an ongoing relationship. The employer decides when and how the work is to be accomplished. The employer assigns the work to be done.
In short, a major distinction between an employee and an independent contractor is how much control the other party exerts over you, your hours, and your work assignments.
Under the FLSA, states have the right to exceed but not undercut the standards set in federal legislation. You can often see this in state minimum wage requirements. The federal minimum hourly wage is still $7.25 an hour, where it’s stood since 2009. In Ohio, the minimum wage for 2021 is $8.80 an hour.
A handful of states, not including Ohio, have opted to create strict tests or standards for judging when a worker is an employee or independent contractor. The federal standards, as detailed above, are pretty straightforward and clear enough, nonetheless.
Employers who shortchange workers by misclassifying them are subject to investigation and possible lawsuits by the Department of Labor. They are also subject to individual lawsuits by misclassified workers claiming back pay for what they weren’t paid because the employer violated state and federal standards. If you’re in or around Akron, Ohio, and you feel you are owed back pay, rely on the Law Offices of F. Benjamin Riek III to investigate your claim and pursue compensation.