Not everyone who works for a company is necessarily an employee. Some businesses hire independent contractors to perform certain work duties. Though the work duties may be similar to an employee’s, the contractor’s status with the company is different.
Because it is not always easy for the casual observer to tell the difference, employers sometimes misclassify employees as independent contractors. Sometimes this is an honest mistake. Other times employers do it on purpose, even though it is illegal.
The following are reasons that employers may purposely misclassify workers.
- Skirting immigration laws
To work in the United States, an employee must either be a citizen or have a work visa. Employers have a responsibility to check an employee’s eligibility before hiring. However, misclassification of immigrant workers allows employers to ignore these laws. Unless a worker reports it, the employer may not get caught.
- Saving money on benefits
Employee benefits such as retirement plans and health insurance can be expensive. Employers may cheat employees out of company-provided benefits by misclassifying them.
- Avoiding consequences of discrimination
There are laws in place protecting employees from discrimination on the basis of age, disability, gender or race. Misclassification may allow employers to avoid the Equal Employment Opportunity Commission, which enforces those laws.
- Shirking responsibilities
Employers owe employees certain responsibilities, such as reasonable work schedules and minimum wage. Misclassification allows them to avoid these responsibilities.
- Avoid paying taxes
The law requires employers to pay certain taxes on all employees. These include Social Security and payroll taxes. However, they do not have to pay these taxes on independent contractors. Misclassification keeps them from paying the taxes they owe.
Misclassification can be costly for both the government as well as the worker. Unfortunately, it often goes undetected unless a worker challenges it.