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3 ways worker misclassification can hurt employees

On Behalf of | Jun 10, 2024 | Employee Rights |

Workers responding to a job offer are often eager to accept opportunities that provide better pay or could grant them a respectable title. Other details about their employment arrangements may not seem nearly as important. For example, quite a few workers agree to employment terms in which the business that hired them treats them like an independent contractor, not an employee. Such arrangements may not seem particularly problematic for the workers involved until issues eventually arise.

A company that misclassifies a worker by calling them an independent contractor while treating them like an employee reaps benefits at the expense of that professional. The following are some of the common issues that arise in a misclassification scenario.

Income tax contributions

Employers have a responsibility to make certain payroll tax contributions. They pay taxes based on the value of the labor provided by their employees. The company also withholds a certain amount from a worker’s paycheck to contribute toward estimated income tax obligations. Self-employed professionals have to cover all tax requirements on their own. They also have to retain money to send in quarterly tax payments. Challenges related to income tax matters can prove very costly for those misclassified by employers.

A lack of insurance protection

Some companies offer employees certain forms of insurance as part of a broader benefits package. However, such offerings are largely optional. There are other forms of insurance that employers have an obligation to carry for the protection of employees. Workers’ compensation coverage and unemployment insurance are examples of mandatory coverage required from businesses with employees. Companies do not have to carry that coverage for independent contractors, which can lead to financial challenges after an injury or unexpected job termination.

Violations of wage laws

Many of the best protections in place for workers rely on their classification as employees. Minimum wage laws and overtime rights only apply to employees, not independent contractors. Companies can violate a worker’s rights by underpaying them and denying them overtime pay.

Workers who realize that a company may have misclassified them are in a difficult position. Sometimes, they may need to take legal action. Doing so could help them recover lost wages or obtain benefits that they otherwise would not receive. Recognizing when an employment lawsuit might be necessary can help those who are dealing with a company that has violated their rights as a worker.