Independent contractors or self-employed professionals have different rights than standard employees do. In theory, they set their own wages and, therefore, have fewer legal protections related to the pay that they receive. Independent contractors have to pay more income taxes with their own funds. They usually don’t have a benefits package provided by an employer, and they don’t have any paid leave in place to help them manage their finances in case of illness or injury. They also generally don’t qualify for workers’ compensation or unemployment benefits.
Many employers would prefer to limit how much they spend on the staffing that they require, and there are limits to how low they can drop their staffing levels. Hiring workers to functionally serve as employees while calling them independent contractors is one of the fastest ways to reduce the cost involved with bringing in new talent. Workers who realize that their employers have misclassified them as independent contractors may eventually need to pursue a wage claim against their employer.
Independent contractors are exempt from overtime pay
Not only do workers misclassified as independent contractors need to pay more in taxes, but they may receive less in general than employees do if they work more than a standard 40 hours each week. One of the multiple reasons that businesses would rather call their workers independent contractors than employees is that employees paid on an hourly basis can receive overtime pay if they work more than 40 hours.
The cost of reimbursing workers at a rate of 150% of their normal hourly pay can very quickly add up and cut into a company’s profit margins. However, calling workers independent contractors does not actually absolve the company of its legal obligations. If the workers realize what has happened, they might pursue a wage claim, possibly as a group, demanding the overtime that they should have earned while working as a misclassified employee.
Workers who believe that their employers have misclassified them need to carefully review work records beyond just their employment contract to verify their misclassification. Establishing that a company intentionally misclassified employees could help affected workers file a lawsuit and obtain the wages that they should have received all along.