Employment Law question--Can you point me in the right direction please?

[jane_pippin]

Smarty-pants DUers, I need your help/opinion. Here's the question/situation:

If an employer misclassifies an employee as an independent contractor, intentionally or not, does the misclassified employee have any legal recourse or any ground to stand on? The classification effects the employee's taxes in that as an independent contractor there is a self-employment tax added (a little over $1,000) that a regular employee would not encounter, and no wages are withheld for FICA etc. from the employee's checks.

Assume the employee does not have any reimbursed expenses, does not set his/her own hours, does not get paid a flat fee, does not set his/her own wages/fees for work performed, is hired "indefinitely" (no fixed period work contract involved), and does not determine what kind of work he/she will do or what projects he/she will work on. (Hence the misclassification).

If this was your situation, what would you do? I'm sure details vary from state to state, but is there a state agency (or federal even, I guess since a federal tax figures in it), you would contact? Would you hire a lawyer and let the lawyer sort it out? What would be your first step (aside from looking for a new job)?

Honestly, I'm not really sure what I'm asking other than have you ever heard of this sort of thing before and if so, what happened? I haven't, and I'm not quite sure what to make of it either.

Thanks (and Happy New Year!) :hi:

[bertha katzenengel]

1. I think it depends upon what the "employee" signed when hired.

If the contract clearly stated "independent contractor," I think there's little recourse no matter what the person was told. But the person wouldn't do any harm to his situation by contacting a lawyer anyway.

I used to be an independent contractor. It's a tough way to make a living but it's a piece of cake for employers to "hire" this way.

Happy new year to you!

[jane_pippin]

2. Well, the law says that what you call the employee doesn't necessarily

matter as much as what the details of the employer-employee relationship are. Just because an employer claims an employee is an independent contractor it doesn't necessarily make it so. That's what makes the person misclassified. (That's if I read the IRS document correctly--it was publication 15-A: http://72.14.203.104/search?q=cache:cG_QAAY6REMJ:www.irs.gov/pub/irs-pdf/p15a.pdf+IRS+publication+15-A&hl=en)

Yes, I guess it would make a difference if the employee signed something at the beginning. But then again, it might not. For the sake of argument, assume it didn't clearly state the status of the employee.

I think you're right--contacting a lawyer wouldn't hurt.

[bertha katzenengel]

3. shows what i know

I don't know the law, really. I just remember my experience as a contractor. Also, I worked for a payroll processing company for five years. :shrug:

Best of luck. :hi:

[jane_pippin]

4. Hey, it was news to me too! When I looked it up I was surprised

to find out that actual guidelines that seemed to help employees in the situation existed. In BushWorld even! Go figure.

I've done a little freelancing before years ago and I hope I don't have to do it again--it's a tough way to make a living.

Thanks for your input and good-luck wishes. :)

[Floogeldy]

5. This is not an employment law issue

This is a tax law issue.

Talk to an accountant. :)

[jane_pippin]

8. Oh? Huh. Who knew...

I'll do that too. I wonder if there're some crossover issues here. (that's just thinking out loud). It's such a weird situation, but I guess it does make sense that it's more of a tax issue than employment issue. Thanks :)

[nothingshocksmeanymore]

10. That may be the case in Wisconsin but not in California

http://www.dir.ca.gov/dlse/FAQ_IndependentContractor.htm

[eyesroll]

6. Here's the IRS lowdown on independent contractor vs. employee:

http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

And here's Wisconsin's:
http://www.dwd.state.wi.us/UI201/t2201.htm

It's a big problem in the industry for which I write. It's actually pretty damn common in other industries too.

There is recourse -- the state department of workforce development can probably take a complaint, as can the IRS. (And, if they can't, they probably know where to send you.)

An employment lawyer would also help, but it would be an expense. I think my first step would be calling the state agencies and going from there.

[jane_pippin]

7. Thanks for the links--They're very helpful.

This whole situation is getting more interesting the more I learn about it. I think calling state agencies first makes sense, too.

Thanks for your help.

[radwriter0555]

13. I reported such an employer to the IRS many years ago when I had the same

type of problem... To whomever was responsible in the state to whom I was paying taxes.... I did it as my having a problem with my employer not giving me my state wages statement by January 31.

I also made the initial assertion that my employer said from the beginning that he was paying my taxes, not me.

He got nailed.

[patcox2]

9. The employee definitely has a claim.

Independant contractors are denied workers comp, they are not paid overtime, you pointed out the tax consequences.

If you blow the whistle and they fire you for it you have a retaliation claim.

There has been a lot of class action litigation as more and more employers try to save money by wrongly classifying employees as contractors.

There are two legal tests, one examines the degree of control over the employee exercised by the employer, the other looks at whether the so-called contractor's duties are in inextricable part of the employer's business.

[LostinVA]

11. Yup -- the IRS can actually help with this

I had this happen to me re: freelance writing.

[Sanity Claws]

12. Maybe you have a claim

but then is it worth pursuing?
The issue of whether an employee was properly classified arises in two main contexts: 1)when the person has an on the job injury - the question is whehter the person have been an employee for which the employer should have been paying workers comp premiums. If this is the context for you, then go to the state department that handles workers comp claims.
2) when the person s not receiving benefits, even though under the employer's benefit plan, all employees are supposed to participate. There have been numerous class actions regarding this, including a huge one against Microsoft. Here an attorney would have to assess whether it is worth pursuing.
If neither situation applies to you, I have some doubts whether you have damages worth pursuing.

[jane_pippin]

14. Thanks for the perspective...

Neither of those two things apply (knock on wood for the injury though--I'm in no mood to get hurt). What pisses me off most about it is that I have to pay that self-employment tax when I'm not technically self-employed. If I was classified correctly that wouldn't even be in the equation. I don't make that much to begin with, and having to save $1,000 + dollars for that when I could be saving it for something else drives me up the frickin' wall.

But, is it worth taking action over? I don't know. I'm guessing it would be more trouble than it's worth, but maybe it's still worth a phone call or two to find out.