More and more companies prefer to hire people as independent contractors than as standard employees. They do so for a number of reasons. There is no formal employment relationship requirement for independent contractors, which means that your employer won’t have to give you notice or severance unless their contract with you requires it.
Your employer can potentially also limit their costs associated with hiring you, such as eliminating workers’ compensation and health insurance mandates. However, for many companies, it will be employment taxes that serve as the incentive to categorize someone as an independent contractor and not an employee. Independent contractors must pay their own employment taxes instead of having their employer pay on their behalf.
What happens if your employer intentionally misclassifies you?
Misclassification pushes costs and liability to other people. If your employer requires that you pay taxes as an independent contractor but still treats you like an employee, they may require that you execute a 1099 tax form so that they can save money.
If they treat you like an independent contractor, they don’t have any obligations to you as a worker, and they don’t have to worry about tax and insurance costs. However, the law prohibits companies from abusing independent contractor classification for financial purposes.
If you believe that the company you’re working for treats you like an employee rather than a contractor, you may be able to bring a claim against them for failing to contribute to your taxes. That’s an issue that could drastically impact your wages. In some cases, people end up fighting back against misclassification after they get hurt on the job and need workers’ compensation.
Reviewing your contract and your work experiences with an employment law attorney can help you determine if yours is a case of intentional misclassification.