Other implications of misclassifying employees

by Michael Haberman on June 12, 2017 · 0 comments


Misclassification of an independent contractor can be very expensive.

When you read stories about employee misclassification most people have a tendency to think exempt vs nonexempt. Generally this kind of reclassification means an employee will now be eligible for overtime compensation and any back pay that may be due. But what happens when the employee has been classified as an independent contractor vs employee?

Independent contractors

Workers who are properly classified as independent contractors have to meet the standards set out by both the IRS and the USDOL, as I have written before in The IRS and HR: Who is an Employee? When they are misclassified there are a lot of potential penalties that an employer has to pay, as I outlined in Do you know the penalties for improperly classifying employees as Independent Contractors? These penalties include:

  • You have not paid an “employee” correctly. You may have missed overtime.
  • You have not recorded work time correctly.
  • You have not filed the appropriate federal and state tax forms.
  • You may not have made appropriate contributions to retirement plans.
  • You may not have complied with the ADA.
  • You may not have provided them with the appropriate protections under either OSHA or the NLRA.
  • You may not have been paying appropriate workers’ comp premiums.
  • You may not have given them the appropriate benefits notices and statements.

So it behooves an employer to know what the rules are and to abide by them. That is where a trucking company may have fallen down.

Trucking company case

According to an article in the St. Louis Record, a Tennessee truck driver is claiming he has been misclassified as an independent contractor and the company:

  • Failed to pay employees for all hours worked,
  • Failed to pay overtime compensation,
  • Failed to track employees hours beyond the hours tracked by the US Department of Transportation; and
  • Failed to pay the minimum wage as required by law.

If indeed these are true statements then the company may indeed be liable.

The one thing that is peculiar about this is that the employee has claimed he has been in this status for TEN years! This brings to mind two questions for me:

  1. Why is the company still using an independent contractor for 10 years?
  2. Why is the worker just now complaining about this situation?

Guidance

Perhaps this company might have benefited from my post on Clamping Down on Misclassification of Independent Contractors? Regardless this will be interesting to see how this one turns out, but if you are using independent contractors there have been some changes in how these situations are handled so it would help if you are up on the rules in order to avoid trouble.


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