Why is misclassification a problem?

There are some cases in which an employer misclassifies an employee. Typically, this happens due to the difference between contract workers and official employees. A contract worker doesn’t qualify as an employee, so they don’t get a W-2 and tend to have more freedom regarding their schedule and what projects they take on.

That said, there are contract workers who have long-term relationships with the same companies. Why would it be a problem if they were misclassified?

A reduction in pay or benefits

The problem is that misclassifying employees can sometimes prevent them from getting benefits that they otherwise would receive. 

For example, a person may not qualify for workers’ comp benefits if they are classified as an independent contractor. An employee, on the other hand, would have the workers’ comp benefits under their employer’s insurance plan. Similarly, a contractor may be barred from the benefits of a pension plan, an employer-sponsored retirement plan or a health insurance plan. 

Additionally, employees are required to be paid at least the state minimum wage. Contractors, on the other hand, may take a certain pay rate per project that they complete. As such, some employers will attempt to misclassify their workers to get around minimum wage laws or pay them less than they are due. Similarly, contractors are often not eligible for a higher overtime pay rate, whereas employees would be.

Your legal options

Disputes over classification issues can become very complex. Those involved need to know what legal steps to take. If you are in this position, having an experienced legal team on your side can help. 


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