Misclassification of independent contractors is a common issue in New York, and it can result in significant consequences for affected workers. When an employer incorrectly classifies an employee as an independent contractor, that worker is denied important protections and benefits, including minimum wage, overtime pay, unemployment insurance and workers’ compensation coverage.
While some workers are truly independent contractors, many are misclassified by employers seeking to cut costs and avoid legal obligations. When an employer labels a worker as an independent contractor when, by law, they should be classified as an employee, that’s misclassification. In New York, the distinction between employees and independent contractors is determined by several factors, focusing primarily on the degree of control the employer has over the worker. If the employer controls when, where and how the worker performs their job, that worker is likely an employee rather than an independent contractor.
Why does this happen?
Employers may misclassify workers unintentionally, or intentionally – usually to reduce labor costs. Independent contractors are not entitled to the same rights and protections as employees, such as health insurance, retirement benefits, paid time off or overtime pay. By classifying workers as independent contractors, employers can avoid paying payroll taxes and contributing to Social Security and Medicare, thereby saving money.
For workers, misclassification can be financially devastating. Additionally, misclassified workers are not protected by labor laws that govern minimum wage and overtime pay, which means they could be paid less than what they are legally entitled to under New York and federal law.
In many cases, workers don’t realize they’ve been misclassified until they try to claim benefits they’re entitled to as employees. If/when that happens, seeking legal guidance can help workers to exercise their rights as effectively as possible.