Full-time employees can be a significant expense for an employer. Wages, overtime pay, taxes, and providing benefits can all cut into an employer’s bottom line.
Independent contractors, on the other hand, generally do not receive benefits. Independent contractors are responsible for reporting their own income taxes. Most independent contractors are not eligible for overtime pay.
It’s easy to see why some employers may wish to use independent contractors. However, just because an employer classifies an employee as an independent contractor, does not make it the truth.
Determining whether a worker is a contractor or an employee
The Fair Labor Standards Act (FLSA) governs whether an employer-employee relationship exists. The FLSA looks at a number of factors when making a classification determination.
It’s also worth considering some factors that are often used to justify classifying an employee as a contractor. You are not necessarily an independent contractor if:
- You work from home or have flexible hours
- You are paid in cash, on or off the books
- You have an employee identification number (EIN)
- You are performing services as a Limited Liability Company (LLC)
- It’s common industry practice to classify workers as contractors
Your employer may ask you to agree to work as an independent contractor. You might sign an agreement which states you’re an independent contractor. Neither action is enough to get around the law. Misclassification is misclassification, and it’s illegal.
Proper classification is important
Full-time employees deserve workplace protections and benefits. You deserve the same benefits if you are effectively working as a full-time employee. You should discuss your legal options with a skilled professional.