Today, more businesses rely on independent contractors as a way of tapping a readily available labor pool and controlling costs. Unfortunately, employers often misclassify employees as independent contractors to avoid minimum wage and overtime requirements, as well as the costs associated with Social Security taxes, unemployment insurance and Medicare taxes. If you have been misclassified as an independent contractor by your employer, you may have a valid wage and hour claim.
At Lipsky Lowe LLP, our wage and hour attorneys routinely represent employees who have been misclassified as independent contractors. If this has happened to you, your employer may be using the misclassification to deny you wages, benefits and protections to which you are legally entitled. Employee misclassifications are a violation of the federal Fair Labor Standards Act (FLSA) and New York labor laws. We believe that employers must be held accountable for engaging in such unlawful practices and will fight to help you obtain the compensation you deserve.
What is an independent contractor?
Independent contractors are basically self-employed individuals who provide goods and services to a business or another person under the terms of a contract. According to the New York State Department of Labor, independent contractors are free from supervision, direction or control of
the services they provide. Generally, independent contractors control their workload, and, unlike an employee, have the right to refuse a work assignment.
In particular, independent contractor status may exist when workers:
- Have an established business
- Advertise in electronic and/or print media
- Use business cards and stationery
- Pay their own expenses
- Set their own schedules
- Negotiate or set their own pay rates
- Carry insurance
- Assume risk for profit or loss
- Have a place of business and invest in equipment, supplies, and facilities
In other words, independent contractor status is not determined by how the employer classifies the work relationship. Ultimately, the distinction between independent contractor status and an employer-employee relationship hinges on the level of supervision, direction, and control exercised by the person engaging the services.
What is an employer-employee relationship?
No specific definition exists of the employer-employee relationship under the FLSA or New York labor laws. Nonetheless, the courts consider a combination of factors in determining the degree of supervision, direction and control exercised over the work performed. Generally, employers control when, where and how employees will perform their job duties. In particular, an employer-employee relationship exists when employers:
- Directly supervise the work performed
- Set the work hours
- Set the rate of pay
- Require attendance at meetings and/or training sessions
- Request oral or written reports
- Reserve the right to review/approve any work product
- Evaluate job performance
- Require prior permission for absences
In New York, employers also have the ability to hire and fire employees at will, unless the parties have entered into an employment contract providing otherwise. It is worth noting that the Internal Revenue Service (IRS) also has an interest in employee classifications due to the tax revenue implications. The IRS relies on a number of characteristics in determining whether a worker is an employee or an independent contractor, including:
- Behavioral control — If the employer has the right to control how the work is done (e.g. through training and instruction) the worker is likely an employee. If a business can only control the result of the work done and not the method of accomplishing it, however, the worker is most likely an independent contractor.
- Financial control — The worker may also be an employee if the employer has the right to direct or control the financial and business aspects of the worker’s performance, such as by reimbursing expenses or providing tools and equipment.
- Type of relationship — If the employer provides benefits such as health insurance, vacation pay, retirement plans, or the work performed is a key aspect of the business, the worker may be classified as an employee.
Why Employers Misclassify Workers as Independent Contractors
Employers attempt to misclassify employees as independent contractors to avoid paying wages and benefits that employers are required to provide to their employees, including:
- Minimum wages
- Overtime pay
- Unemployment benefits
- Health insurance
- Workers’ compensation benefits
- Short-term disability insurance
- Social Security benefits
- Contributions to Medicare
- Income tax withholdings
Misclassifying an employee as an independent contractor is tantamount to paying that employee off the books, which violates state and federal employment laws. These laws are not only designed to protect the legal rights of workers but also to prevent businesses from misclassifying employees to gain a competitive advantage in the marketplace over those who properly classify their employees.
Contact Our NYC Employee Misclassification Attorney
If you believe that your employer has intentionally misclassified you as an independent contractor to avoid paying benefits and compensation you deserve, our wage and hour attorneys know how to fight back. Our legal team will assess the validity of your claim and choose the best course of action.
If you have been misclassified as an independent contractor, chances are others have been as well. Under these circumstances, an effective way to hold an employer accountable is through a class or collective action. A class-action lawsuit combines the claims of numerous individuals who have suffered similar harm to maximize the value of claims. Such an approach can bring to bear significant pressure on a business which can not only prompt the employer to settle the matter fairly but also refrain from similar misconduct going forward.
In any event, we will leverage our trial experience and negotiating skills to make sure that you are fairly compensated. Depending on the circumstances, you may be able to recover back pay, compensatory damages, punitive damages, as well as attorneys’ fees and legal costs. This means that you will not pay any fees to us until we win your case. Please contact our office today for a free evaluation of your case. When you consult the wage and hour attorneys at Lipsky Lowe, you will have strength in your corner.