What Is the Difference Between an IC and an Employee? What if My Employer Misclassified Me?
There are key differences between employees and independent contractors. Employment benefits, taxes, and employer liability can all be affected by your worker status. If you accept a position as an independent contractor, you should know how being an independent contractor differs from being an employee.
Employers sometimes deliberately misclassify employees as independent contractors to avoid certain legal obligations. If you believe you’ve been misclassified, you should get help from a California employment law attorney. You could be entitled to recover back pay and interest on unpaid earnings through a wage and hour lawsuit.
Let’s examine some of the main distinctions between employees and independent contractors.
Employees vs. Independent Contractors
Employees typically work for a single employer, but independent contractors may offer their services to multiple companies. Some of the other differences between employees and independent contractors include the following:
- Employees work on a schedule created by their employer. Independent contractors typically make their own schedules.
- Employees usually perform their work duties at the employer’s place of business. Independent contractors, however, often work at a separate location, which could be their personal office or home.
- Employers have the right to direct and control employees’ work, while independent contractors typically do their work independently.
- Employees are entitled to certain employment benefits. These benefits may include health insurance, paid time off, retirement, etc. Independent contractors are not entitled to employment benefits. If you work as an independent contractor, you generally won’t be able to get health insurance or retirement benefits through your employer.
- If an employee is injured on the job, they are usually entitled to claim workers’ compensation benefits. However, an independent contractor who is injured while working would likely not be entitled to benefits.
- Employers are protected by certain employment laws, including anti-discrimination laws and workplace safety regulations. Independent contractors don’t typically have the same workplace protections.
- Employees typically have income taxes withheld by their employers, along with other taxes, including Medicare and Social Security. Independent contractors do not have their taxes withheld by the business owner they work for and must manage their self-employment tax requirements independently.
- Employees are protected by the Fair Labor Standards Act, which includes laws known as wage and hour laws that govern the minimum wage and the pay rate for overtime hours. Independent contractors are not entitled to overtime pay and are compensated as specified in their contract.
Employers sometimes knowingly misclassify their workers as independent contractors because doing so can save them significant money. While this may benefit the employer, being misclassified as an independent contractor can be incredibly costly to someone who is supposed to be categorized as an employee.
What Can I Do If My Employer Misclassified Me?
If you think you’re supposed to be classified as an employee, but your employer has classified you as an independent contractor, it is critical to determine your true employment status and remedy the situation as quickly as possible. Here are things you can do:
- Speak with your employer – Before taking other action, you could speak with your employer to find out why you’ve been classified as an independent contractor and to request that they re-classify you as an employee. If nothing else, your employer will explain why they believe you should be classified as a contractor.
- Contact the IRS – if discussing the issue with your employer isn’t productive, you could get the IRS involved. By filing IRS Form SS-8, which you can do for free, you can ask the IRS to ascertain your worker status. On this form, you will provide answers to questions about the nature of your employment so that the IRS can determine how you should be classified for federal tax purposes. Keep in mind that the IRS may disclose your identity to your employer when they reach out to confirm your employment details. Once the IRS has collected information about your employment from your employer, they will decide how you should be classified. Your employer could get into trouble if they do not honor the IRS’s determination.
Under California Labor Code §226.8, it is against the law for employers to willfully misclassify employees as independent contractors. If your employer deliberately misclassified you, you could be entitled to compensation through a wage and hour lawsuit, and the government could fine your employer.
If you were misclassified as an independent contractor, contact a California employment law attorney at Wagner Zemming Christensen, LLP. Call us at 951-686-4800 for a free consultation to discuss your situation and review your legal options.