IF I HAVE EMPLOYEES WHO ARE IMPROPERLY CLASSIFIED AS INDEPENDENT CONTRACTORS, WHAT LAWS COULD IT IMPLICATE?
While most independent contractor misclassification disputes occur in the wage-and-hour context, disputes also can arise under federal and state discrimination laws, tax laws, and unemployment laws, just to name a few.
Implementation of the Patient Protection and Affordable Care Act (PPACA) also raises the prospect of liability, as it requires each employer with a specific number of employees to provide them with health benefits or risk paying an excise tax (based on the number of employees). Having the status of an “employee“ for purposes
of many laws affords such individuals greater rights and benefits than if they were independent contractors.
HOW DO I DETERMINE WHO IS AN EMPLOYEE AND WHO IS AN INDEPENDENT CONTRACTOR?
There is no single test to determine who is an employee versus an independent contractor; rather the correct analysis depends on the relevant statute or claim. All tests, however, take into consideration, in whole or in part, the degree of control the purported employer has over the purported employee’s performance of the job.
Every test, whether it is the Internal Revenue Service (IRS) test, or the test used under the Fair Labor Standards Act, is heavily fact-driven with no single factor being dispositive. The IRS has stated that, “there is no ’magic’ or set number of factors that ’makes’ the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.“
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