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Why employers misclassify employees as independent contractors

On Behalf of | Apr 25, 2022 | Employment Law |

There are benefits to being an employee and benefits to being an independent contractor in New Jersey. Employees typically enjoy benefits that may not be offered to independent contractors. They also have taxes deducted from their paychecks which can make filing taxes a little easier. Independent contractors on the other hand are able to set their own schedule and move from project to project easier, picking and choosing what works for them. Sometimes they also may receive a higher hourly pay as well.

Many workers do choose to work as an independent contractor when they see it as beneficial, but it is important that they receive the benefits of being an independent contractor. Some employers will classify a worker as an independent contractor, but still control their work as if they were an employee. When this occurs it completely frustrates the purpose of being an independent contractor, but there are reasons misclassifying employees as independent contractor is beneficial to the employer to classify an employee as an independent contractor.

Benefits of misclassifying employees as independent contractors

The main reasons employers do this are:

  • They do not need to pay Social Security and unemployment insurance taxes for independent contractors, which can save thousands of dollars.
  • They may not need to abide by wage and hour laws with independent contractors.
  • Independent contractors are not protected by laws enforced by the Equal Employment Opportunity Commission such as wrongful termination.
  • Employers do not need to include independent contractors in benefit programs such as health benefits or retirement plans.

While some people choose to give up these benefits for more job freedom by being an independent contractor, if they do not receive the freedom, they should receive the benefits employees receive. If an independent contractor is misclassified, they can seek the benefits of an employee, but it may need to occur through a lawsuit to address the specific adverse actions taken against the independent contractor. These can be very complicated matters and consulting with experienced attorneys could be beneficial.