Workers who are misclassified as independent contractors instead of employees are at a severe disadvantage. From a legal standpoint, an independent contractor is not entitled to minimum wage standards, overtime pay, unemployment benefits, or even breaks. Additionally, healthcare and social security coverage aren’t guaranteed.
Misclassification has been a long-standing issue for some time. And with the rise of the digital economy and gig work, more legal battles will likely be waged in court. As new online platforms and tech startups continue to disrupt entire industries, companies are constantly looking to cut operational costs to remain competitive. Unfortunately, a number of these firms prefer misclassifying their employees to avoid fulfilling their obligations as employers.
Before seeking out a private or class action lawsuit with the help of an attorney in San Diego, CA or elsewhere, it’s crucial that you know what to do in case of misclassification.
Engage your employer in an honest conversation
A key first step is to get the employer’s side of the issue. Why did management think you should be classified as an independent contractor? What factors did your employer consider?
These are just some of the questions you can use to at least get a proper explanation from the company. Make sure to keep a record of their responses. These may prove useful later on.
If your employer’s responses are unsatisfactory or they have simply ignored your inquiries, you may have to ask relevant government agencies to step in.
Ask the IRS to help determine employment status
You can ask the IRS to clarify your employment status within the company. Submitting an SS-8 IRS Form enables the IRS to determine your worker classification for purposes of federal taxes and income tax.
The form contains questions that will ask for information on your job functions, the nature of employment, and the degree of management’s control over various aspects of the job.
Likewise, the IRS will also ask your employer similar questions. This might inadvertently reveal that you initiated the action for worker status determination.
While government agencies have different approaches to determine your employment status, the “right of control” of an employer over a worker is generally the main consideration. This “right of control” concept covers:
- Control of employee’s behavior in the workplace (e.g., instructions or training sessions are provided to ensure workers follow company processes)
- Financial control over employees (e.g., company provides work facilities and equipment for workers; reimburses workers for travel expenses incurred)
- The employer-employee relationship (e.g., company can fire workers at any time; provides employment benefits to workers such as free gym membership or food allowance)
Follow up by submitting an IRS Form 8919
If the IRS determines that you are indeed an employee who was misclassified, you can proceed with the filing of IRS Form 8919. This form details the total amount of uncollected Social Security and Medicare taxes that should be shouldered by your compensation. Your employer is obligated to pay half of these taxes for employees.
A misclassification as an independent contractor may put you in the unfortunate position of paying for the entirety of total taxes due. You can avoid this inconvenience by filing Form 8919 to resolve any tax discrepancies.
If you received both W-2 and 1099-MISC from the same company during the same tax year, an 8919 Form may be applicable. The same is true if your employer did not withhold Social Security and Medicare taxes from your pay even though you performed services that fall under the duties of an employee.
Claim unemployment insurance
In many cases, an employer may terminate workers before they even get the chance to resolve an issue of misclassification. When that happens, you can go to your state unemployment agency to claim unemployment insurance. In California, you can file your claim with the Employment Development Department.
You can explain and present evidence that you’ve been misclassified as an independent contractor. If all goes well for you, the agency may implement hefty fines on your employer and ensure they pay for your insurance premiums.
Seek the help of lawyers specializing in employment and labor issues
When you’ve been misclassified as an independent contractor, losses can pile up quickly. If you or anyone you know has been misclassified as an independent contractor, Hogue & Belong Attorneys at Law is here to assist you and help resolve issues with your employer.