No worker should work as an employee and at the same time be an independent contractor in the same company. But this may be possible if one is working for different companies. The law is very clear when distinguishing between employees and independent contractors. This is based on the relationship one has with their employer.
If you are wondering whether you are working as an employee or an independent contractor, this guide provides information to help you avoid being misclassified.
Who Is An Independent Contractor(IC)?
An independent contractor is an individual who has a contract to work for another person according to their own methods. Such a person is not subject to any other control except for whatever is included in their contractual agreement. If you have been employed as an independent contractor, you want to make sure your employer treats you as an employee.
Who Is An Employee?
An employee is a person who works to get paid an annual salary or hourly basis on a specific job. An employer controls what work to do and when to do it. The Internal Revenue Service (IRS) sets the standards of who is to work as an employee.
If you have been working but unsure whether your employer is treating you as an independent contractor or an employee, the below difference may help you determine your position. The law is very keen to track an employer who misclassifies employees as independent contractors to satisfy their money greediness.
Such issues may require one to have best employment law attorney in California as employers who are found in the wrong tend to take adverse actions against an employee who complains. An experienced employment lawyer can help you with the best options to take if you have been misclassified as an IC instead of an employee.
The Difference Between An Employee And An Independent Contractor
Many people are not aware of the difference between employees and independent contractors. Below are some of the common ways that one may use to distinguish between the two:
- Taxes: Employees can have their taxes withheld back to their paychecks, but an IC has to pay for any estimated tax each quarter. Besides, an employee shares Medicare and Social Security taxes with their employer, whereas an IC is responsible for these obligations.
- Business deductions: An IC qualifies for more business deductions on their incomes compared to employee
- Employment benefits: An employee gets standard employment benefits such as social security disability benefits, health care insurance, dental services, paid vacation, among others, while an IC has to fund their own benefits. Worse enough such benefits may not be tax free keeping in mind that employee gets such benefits tax free.
- Negligence: An employer cannot be held liable for the negligence act of an IC, whereas they can pay for damages caused by their employees. For instance, if an employee caused an accident with a company car and it’s established he/she was under the influence, the employer may be pinned down legally because they never performed an adequate criminal background check to determine whether the employer was using drugs.
- Work control: An employee has no control over what to do and how to do it, whereas an IC has no control over their hours. One can opt to work on weekends and work on other tasks during weekdays. Also, an IC controls how much money to charge for a given project and whether to accept or reject a project.
Why Employers Misclassify Independent Contactors As Employees
If you believe to be an employee, but your employer has misclassified you as an independent contractor, life may be tough on you. This means that your employer will have control over your work and work methods but force you to pay for all your Medicare or Social Security taxes. Besides, if you suffer from a work-related injury, you will not be eligible for workers’ compensation benefits. Many negative outcomes relate to the misclassification of IC instead of an employee. If you learn of this mistake, you should immediately talk to your employer. He/she may be willing to pay all damages and rectify such issue/ But if your employer had a bad intention of saving money and is unwilling to talk over the matter, you need to take other legal steps:
- Contact the IRS to determine your employment status. You will be required to file an IRS form to answer some questions on how your employer treats you. The agency will then contact your employer to clarify the facts.
- File tax returns with IRS Form 8919 to report any uncollected Medicare or Social Security taxes.
There are other steps to take, such as filing workers’ compensation benefits where you may have suffered work-related injuries. Also, if you complained about the issue and your employer fired you, you may file an unemployment insurance claim to have your employer pay unpaid insurance premiums.