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Employee misclassification an illegal way to increase profits

The goal of most employers is to make a profit. This is probably not a big surprise to any of our Evesham Employment Law Blog readers. Employers will find the best deal on supplies, enter into contracts that provide the greatest benefit or structure employee schedules to ensure that labor costs are in balance with the work that needs to be done.

It isn’t a bad thing to seek to make a profit. It becomes an issue when this drive for profit comes at the expense of the employees. That is exactly what a number of employers did during the recession, according to labor officials in states across the country.

The tool that was used was the misclassification of employees as independent contractors, and a lot of states are cracking down on this practice.

How does an employer save on misclassifying employees? There are several ways. For instance, an independent contractor isn’t due the same wage and hour protections that a fulltime employee is.

An employer can even save money on taxes by calling an employee a contractor. For instance, according to a June 14 report from the Treasury Inspector General for Tax Administration, if a worker earns a $43,007 annual salary, an employer could put an extra $3,710 each year in their pocket by misclassifying the worker.

This practice not only comes at the expense of the workers’ rights, but it is illegal. It isn’t always easy to spot where a misclassification has occurred. Are you paid less than the prevailing wage for your type of work? Are your checks issued by a third party? Have you been told that you are not eligible for overtime pay? Are you denied the benefit of mandatory meal or rest breaks?

These could all be indicators that misclassification has occurred, but a discussion with an attorney is the best way to answer the question to get the process for resolution started in New Jersey.

Source: Insurance Journal, “States Going After Employers Who Misclassify Workers as Independent Contractors,” Jim Efstathiou Jr., Oct. 18, 2013

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