Federal and state laws define employment based on the working relationship, not the label on your contract. When your employer controls your schedule and directs how you complete your work, you may qualify as an employee. If you have been misclassified as a contractor, you may be missing out on certain legal obligations.
Overtime pay
When your employer misclassifies you as a contractor, you do not receive overtime compensation. Under the Fair Labor Standards Act (FLSA), employees who work more than 40 hours per week typically earn time-and-a-half pay.
If you regularly work long hours without extra pay, you may be losing thousands of dollars that rightfully belong to you. You may be able to file a claim for up to three years of back-pay for unpaid overtime if the misclassification was willful.
Employment benefits and leave
Besides wages, you may also lose access to employment benefits that often accompany employee status. You can miss out on health insurance, retirement contributions, paid sick leave and vacation time.
Additionally, you cannot participate in employer-sponsored retirement plans like 401(k)s. These benefits often represent a substantial portion of total compensation that you never receive.
Workplace safety nets
When you face misclassification, you lose critical safety net protections. If you lose your job as a misclassified contractor, you cannot collect unemployment benefits. Furthermore, if you suffer an injury on the job, you have no access to workers’ compensation benefits.
As a contractor, you must cover these costs yourself. This leaves you financially vulnerable during difficult times.
Employer contribution to taxes
When your employer treats you as a contractor, you shoulder a heavier tax burden. Misclassification forces you to pay both the employer and employee portions of Social Security and Medicare taxes. This means you must pay the full 15.3% self-employment tax. As a result, your take-home pay decreases significantly.
Civil rights and legal protections
Several legal protections do not apply when you hold contractor status. These include protection from discrimination, harassment and retaliation under federal and state workplace rules. If you are a contractor, you may find it significantly harder to hold a company liable for these.
Understanding your rights
Misclassification costs you far more than you might realize. If you believe your employer has misclassified you as a contractor, speaking with a knowledgable advocate can help you understand your options and take steps to recover what you have lost.