Thursday, September 20, 2018
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‘Independent Contractor’ classification can be a bad bargain for workers

Q:        I work as a traveling technician for a company. Recently, my employer asked me to sign an “independent contractor” agreement and told me that I will now be receiving a 1099 instead of a W-2. Being on 1099 allows me to take home all my pay with no withholdings. But is there anything else I should know about this before I sign the contract? 

A:        Yes, there are several things you should know about being classified as an “independent contractor” or IC. First of all, ICs are not considered employees and do not have the same rights as employees.

Unlike employees, independent contractors do not have to be paid minimum wage, overtime, or missed breaks. They are not entitled to benefits such as health insurance, retirement or pension benefits. ICs are not entitled to reimbursements for business expenses. These expenses may include fuel, insurance, living, and other travel expenses; purchasing supplies, tools, materials, or equipment such as cell phones related to work.

Some companies pass on the costs of doing business to “independent contractors” by deducting them from workers’ pay. These deductions result in lesser wages. On the other hand, employees are entitled to reimbursements if they incur these business expenses.

It might at first sound enticing to receive pay that has no withholdings like taxes. However, this does not mean that the worker will not be paying taxes on their wages. At the end of the tax year, the company will still issue an IRS form 1099, and the worker will then have to pay the taxes.

ICs are also not entitled to workers’ compensation protection. When employees are injured at work, workers’ compensation benefits provide them medical treatments and disability payments. If ICs are harmed at work, they’re on their own and the company that hired them are not liable for any of their injuries.

Companies cannot arbitrarily classify workers as ICs. The status of a true independent contractor is defined by law. Courts look at several factors to determine whether a worker is an employee or an independent contractor. The most important factor is the employer’s right to control the worker’s manner and means of performing the job.  If the employer determines how the worker should do the work, then the worker is an employee and not an independent contractor.

Some employers have been penalized for misclassifying nurses, caregivers, drivers, appraisers, technicians and janitors as independent contractors even though they were in fact employees.

Evaluating whether a worker is correctly classified as an IC may become highly technical. Workers should not hesitate to consult with experienced employment attorneys to determine if they are really employees entitled to greater rights and protections under the law.

The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com or our Facebook page Joe Sayas Law. [C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully recovered wages and other monetary damages for thousands of employees and consumers. He was named Top Labor & Employment Attorney in California by the Daily Journal, consistently selected as Super Lawyer by the Los Angeles Magazine, and is the recipient of PABA’s Community Champion Award for 2016.]

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TAGS: employee rights, independent contractor, independent contractor disadvantages, IRS form 1099, job classification, tax filing, W-2 form
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