When you take a job, you have to fill out that paperwork that helps your employer withhold the right amount of income tax contributions from each paycheck. Sometimes, employers have you fill out a 1099 document as an independent contractor instead of having you fill out a W-2 as a new employee.
You may not understand the risk involved with accepting a job as an independent contractor. Your employer may tell you it is standard practice. However, there are numerous standard workplace protections that you effectively lose when a company classifies you as an independent contractor instead of as the employee that you clearly are.
Workers’ compensation insurance coverage
Whether you work with customers or machinery, you can get hurt badly on the job. Workers’ compensation insurance protects you if you get hurt while on the clock. You can claim benefits to cover your medical treatment and even receive partial benefits for the wages you don’t learn because of your condition.
Employers can avoid carrying workers’ compensation coverage for staff members that they classify as independent contractors. If you don’t carry your own coverage, you won’t have any protection if you get hurt on the job.
Overtime pay rights
As an hourly worker or a non-exempt salary worker, you would receive at least 150% of your hourly wages when you put in more than 40 hours in a week. Employers can avoid the obligation to pay you overtime by hiring you as a contractor on a project basis instead of on an hourly basis.
Employment tax contributions
Employers don’t just withhold money from your paycheck to pay your taxes. They also have to make tax contributions based on the value of your labor.
When they classify you as an independent contractor, you suddenly become responsible for all of those taxes yourself. Additionally, you will have to file quarterly tax returns and withhold money from each paycheck to pay your taxes or risk not having the money you need when you file your return.
Misclassification benefits the employer and puts the worker at risk. Fighting back against workplace misclassification can help you get benefits or pay that the company has previously denied you.