What are the impacts of misclassification?

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What are the impacts of misclassification?

On Behalf of | Mar 22, 2022 | Employment Law

Employee classification is much more important than people tend to give it credit for. Not only does it determine the sort of benefits and protections a worker receives, but it also determines the type of pay.

Getting a close look at an employment contract is a good way to ensure that employers are not trying to cheat and misclassify intentionally in order to get out of paying an employee the proper amount.

When do employers misclassify?

The U.S. Department of Labor looks at misclassification of employment. In specific, many employers may try to misclassify employees as independent contractors when in reality, they fit the working conditions and contingencies that they need to in order to fit proper employee classification.

According to the Department of Labor, a person is considered an employee and not an independent contractor if they work for an employer rather than multiple clients and do not work for their own business, but rather someone else’s.

The definition of employee

Employees receive an hourly or salaried rate, rather than getting paid per project. They also use the resources and tools of the employer rather than using their own. Their relationship with the employer is continuous rather than hinging on specific jobs. Finally, they do not determine their own tasks, but rather get assigned tasks by an employer.

If an employer misclassifies someone as an independent contractor, that person could lose out on stock options, healthcare plans, retirement benefits and more. They will also miss out on the opportunity to get compensation for overtime, and access to paid time off. This is why it is important for all employees to understand where their classification truly lies.