You may hear a lot about the gig economy, but the reality is that a majority of the American workforce are W2 employees. By accepting a job working for someone else, you expect fair compensation for your work and the protections that come from being an employee.
But what happens if your employer classifies you as an independent contractor instead of an employee? Does it really matter?
What is employee misclassification?
Employee misclassification occurs when a worker is treated as an independent contractor rather than an employee. This can sometimes happen accidentally, such as a clerical error. However, some employers misclassify their employees to cut costs.
As an employee, being misclassified as an independent contractor can affect nearly every aspect of your working life, such as:
- No overtime pay: Employees are entitled to overtime pay when they work over 40 hours per week. Independent contractors are not. You could be working long hours without proper compensation.
- No benefits: Employers may provide benefits to their workforce, such as health insurance, retirement contributions and paid time off. Independent workers receive none of those.
- No unemployment or workers’ compensation: These are safety nets for individuals who lose their jobs or are injured on the job. Misclassified workers aren’t entitled to either one.
- Higher tax burden: Payroll taxes are automatically withheld from the employee’s paycheck, with employers paying a portion of Social Security and Medicare. Independent contractors must pay the full amount themselves, which could be a significant financial hit.
- Fewer legal protections: Misclassified workers lack the protection afforded by anti-discrimination laws and minimum wage laws.
The Texas Workforce Commission (TWC) uses a 20-factor test to determine if a worker is an independent contractor or employee, which asks questions such as:
- Does your employer control your work schedule?
- Does your employer tell you how to do your job?
- Are you paid regular amounts at certain intervals?
If you suspect you’re misclassified as an independent contractor, there are steps you can take. Review your employment agreement to determine what it states regarding your position. Keep records of your schedule and pay. Discuss your concerns with your HR department. You will also want to seek help from a legal representative. They can help determine if you’ve been misclassified and help you recover lost wages or benefits.