If you receive a pay stub with your paycheck, then quickly browse where it contains the deductions. Do you see where any were taken out? If not, your employer could have you classified as an independent contractor.
This is just one of many approaches an employer may take to avoid hassle with payroll deductions. There are countless other reasons why employers may misclassify an employee’s status, though. While it may seem like those reasons don’t affect you, they might.
What are some of the most common reasons employers misclassify workers?
Employers may misclassify employees for a variety of reasons. The Affordable Care Act requires employers with at least 50 full-time employees to provide medical coverage 95% or more of them. Smaller companies have become more strategic about how they classify their employees to avoid having to abide by laws like this.
Earlier, we mentioned employers misclassifying employees as independent contractors to avoid withholding taxes that go to paying for government programs such as Medicaid or Social Security. They also avoid paying workers’ compensation premiums and unemployment benefits. It gets them out of making 401(k) contributions, having to offer health insurance and paid time off by keeping their workers as independent contractors as well.
What happens to employers who misclassify employees, and what are my rights as an employee?
Employers who misclassify employees may be subject to penalties, including fines and back taxes. An employee could also be subject to both penalties and back taxes. You may be able to request any unpaid compensation under both state and federal law if your employer neglected to pay you due to your misclassification. You may want to discuss your misclassification issue with an attorney to learn more about the steps you should pursue if your employer indeed engaged in impropriety.