Some things that employers do to save money can directly harm their workers. Certain forms of employer misconduct have an obvious negative impact on workers. Safety violations, for example could lead to catastrophic workplace accidents. Cost-cutting measures could also mean there aren’t enough workers on hand or that machinery goes without crucial maintenance.
The issues with employment paperwork may not seem nearly as serious when compared with issues that can put workers in harm’s way. However, worker misclassification is actually a major job concern. Employers that wrongfully classify workers as independent contractors put their employees at risk. Companies misclassify workers by having them fill out contracts and tax paperwork as independent contractors instead of employees. These three issues below are all negative consequences related to someone’s misclassification as an independent contractor.
A lack of pay rights
Rules related to minimum wage and overtime pay rights apply to hourly workers and non-exempt salary workers. Independent contractors theoretically set their own employment terms. Therefore, the government does not micromanage their right to overtime pay or minimum wage. Companies could put workers in a situation where they do not earn a fair wage by misclassifying them.
Issues with workers’ compensation or unemployment coverage
Employers generally need to contribute toward unemployment benefits on behalf of all of their employees. They also need to provide workers’ compensation coverage in case someone gets hurt on the job. Independent contractors do not have the protection of those forms of coverage, which might mean that workers lose their jobs and become unable to support themselves. They may need to go to court to get unemployment. If someone gets hurt on the job, they may have an uphill battle if they need workers’ compensation disability benefits and health coverage for their injuries.
No tax contributions
Employers typically contribute toward employment taxes. Workers pay less out of each paycheck because of what the business pays for the value of their labor. Self-employed individuals have to cover those expenses themselves. They will have to retain enough money to cover those employment taxes when sending in estimated quarterly tax payments and filing their annual tax returns.
For the most part, companies benefit by misclassifying workers, while employees lose out on crucial protections. Fighting back against misclassification can help workers get the pay or benefits they deserve.