When Your Job Isn’t What It Seems: 10 Challenges of Being a Misclassified Worker

By India Grant | Legally Reviewed by Kevin Ross-Andino | Last Updated on March 10, 2023

When you go to work, it pays to understand and know your rights. But what if the job you have isn’t what it seems? It’s an unfortunate reality that many people find themselves in positions where they are incorrectly classified as independent contractors instead of employees – a misclassification issue with serious implications. Despite their unique circumstances, misclassified workers face similar issues when challenging the classification status imposed on them by employers. This blog post examines 10 common challenges of being a misclassified worker and offers guidance on how to get help in dealing with these situations. Whether you are faced with potential exploitation or uncertainty about your employment status, understanding this problem is key to securing adequate protection for yourself and better leverage against potentially unscrupulous employers.

What is independent contractor misclassification and why is it a problem?

Independent contractor misclassification means the incorrect labeling of employees as independent contractors. This happens when a company gives employees tasks and authority but still classifies them incorrectly as independent contractors to avoid employee expenses and responsibilities. Misclassifying somebody as an independent contractor is illegal, as many employee benefits — like minimum wage, overtime pay, unemployment insurance, Social Security contributions, and workers’ compensation — aren’t extended to the employee. This can put companies at risk for large monetary penalties like back taxes or fines and other costly consequences like employee misclassification lawsuits or back pay. To prevent worker misclassification issues before they arise, companies should be aware of the guidelines surrounding employment classification and have policies in place that ensure accuracy.

The 10 challenges of being a misclassified worker

Are you an independent contractor whose rights have been taken away? You may be misclassified. Misclassification of workers is a common problem encountered by independent contractors, and I’ve found ten distinct challenges of being a misclassified worker. Read on to learn what these problems are and how best to protect yourself from them if you’re facing misclassification in your workplace. While it can be intimidating, understanding your rights is the first step toward getting them back!

1.  Lack of job security

One of the most difficult challenges for a misclassified worker is the lack of job security. Companies can easily fire independent contractors without any process, so misclassified 1099 employees have no protection from sudden terminations or layoffs. Even if the worker had a verbal agreement or an employment contract, it is still possible for them to be fired without cause or notice due to their misclassified status. This can make it difficult to build up savings or plan for future employment.

2.  No employee benefits

Independent contractors are not eligible for the same benefits as regular employees because as self-owned businesses, they are expected to provide for themselves. Where employees have benefits like paid vacation, health insurance, and retirement fund contributions provided by their employers in the terms of their employment agreements, 1099 contractors are bound by the terms of an entirely separate type of contract with their client companies. When you are improperly classified as an independent contractor, your “employer” is taking advantage of your services without providing the freedoms you’d enjoy as a properly classified worker.

3.  Unfair wages and abuse of overtime law

Employee misclassification can have a huge impact on your wages and overtime hours. If you are classified as an independent contractor, you may not be eligible for overtime pay that is legally mandated for regular employees through the Fair Labor Standards Act (FLSA) — meaning, you could be asked to do more than 40 hours of work per week without receiving time-and-a-half pay. You may also be paid a lower rate than other employees doing the same job.

4.  Limited access to workers’ compensation benefits

Workers who are injured on the job and receive no coverage from employers due to being miscategorized as independent contractors cannot put in claims for worker’s compensation. This means that the employee is solely responsible for covering medical expenses, lost wages, and other related costs from their own pocket if they sustain an injury at work. Combined with ineligibility for health insurance benefits, this leaves injured 1099 workers in a tough spot, especially if they had assumed they were regular employees.

5.  Ineligible for unemployment benefits

Misclassified workers do not qualify for unemployment insurance payments when they lose their jobs, since they were never technically considered to be employees. This can create serious financial hardship for those workers and their families, as they lose their source of income upon becoming unemployed.

6.  Difficulties filing taxes

If you’re incorrectly classified as an independent contractor instead of an employee, you may be unable to make legitimate deductions on your tax returns that would be available if you were correctly categorized as an employee. You may also have to pay a higher tax rate than employees due to being “self-employed.” This can be a huge hassle if you don’t realize you’re an independent contractor because self-owned businesses must pay estimated tax quarterly in addition to filing an annual tax return. It’s also possible to face an audit if the Internal Revenue Service (IRS) notices discrepancies in your filing status or income. Companies misclassify employees as independent contractors so that they do not have to pay taxes on those workers, putting the burden on the workers themselves — which may be illegal if you are doing work in a way that categorizes you as an employee.

7.  Not being able to enforce your rights

Without the protection of labor laws, independent contractors may have difficulty asserting their rights in the workplace. As an independent contractor, you are entitled to control the details of your work, finances, and scheduling, among other things. However, because you are not covered by federal or state labor laws like unemployment insurance, overtime, or anti-discrimination, companies may retaliate against you for challenging them or standing up for yourself by cutting back work hours, denying benefits, reducing payment terms, or firing you. Misclassified workers may not know or understand their rights or the legal repercussions of job misclassification if they did not realize they were independent contractors in the first place. Make sure you’re aware of your classification and whether it is correct, so you can protect yourself and assert your rights.

8.  No Social Security

Employers are not required to make contributions to Social Security, Medicare, or unemployment insurance on behalf of independent contractors, leaving them without financial safety nets. When a worker is misclassified, they may not understand the responsibility to make those contributions themselves, which can affect their future benefits if they become disabled or of age to retire.

9.  Risk of exploitation

Employers will take advantage of workers by misclassifying them — using their labor without giving any benefits in return. As a misclassified employee, you may be forced to work overtime hours without applicable pay, asked to purchase your own tools without reimbursement, have your work supervised and micromanaged by the company, or be scheduled at the company’s discretion, all outlined in an independent contractor agreement that you are compelled to sign before employment. This leaves you stuck with the “worst of both worlds,” being treated as an employee but told you’re an independent contractor. Meanwhile, companies enjoy the “best of both worlds,” having control over when and how you work for them without having to pay for benefits, taxes, equipment, or overtime.

10.  Difficulties in organizing and unionizing

Under the current National Labor Relations Act, only employees are protected from retaliation while organizing for better working conditions, not independent contractors. Employers are also under no obligation to bargain with unions over the terms of an independent contractor’s agreement. This doesn’t mean that a misclassified worker cannot join a union — there are organizations out there that support 1099 workers by drafting contracts, providing resources for insurance, and fighting for your legislative rights — it just means that you are not afforded the same privileges as regular employees.

What to do if you think you’ve been misclassified as an independent contractor

First, you need to know the law.

In the state of Florida, workers have certain protections against misclassification as independent contractors. The definition of an independent contractor is based on common law, which states that a worker can be classified as an independent contractor if they are free from control or direction over their work and performs activities that are outside the scope of a company’s usual operations.

The Fair Labor Standards Act (FLSA) requires companies to pay taxes and overtime wages to employees but not to independent contractors. However, the definition of “employee” under the FLSA includes both employees and those who are misclassified as independent contractors. As such, if a company attempts to avoid paying for employee benefits by classifying workers as independent contractors, these workers may still be eligible for back wages, overtime compensation, and other benefits.

Then, consider the following steps.

  1. Gather documents and evidence to support your claim that you are a misclassified worker. This can include timesheets, tax returns, paychecks, job description documents, and more.
  2. Identify the correct job classification for your work by researching similar positions and their corresponding classification within the state or federal guidelines.
  3. Contact an employment attorney or labor representative to discuss the possible avenues of recourse available to you as a misclassified worker, such as filing an administrative claim or bringing a lawsuit against your employer.
  4. File an administrative claim with the appropriate state or federal agency, such as the Department of Labor’s Wage & Hour Division or Office of Workers’ Compensation Programs (OWCP).
  5. Explore options for negotiating with your employer before embarking on legal action; they may be willing to rectify the situation without escalating matters further.
  6. If all else fails, consult a lawyer about bringing a lawsuit against your employer for wrongfully classifying you and denying you overtime wages and other benefits due to misclassification.

Independent contractor misclassification can be an incredibly complicated and frustrating problem, but it is worth addressing. If you are an employee who has been misclassified as an independent contractor, you must educate yourself on your rights and the law. Gather documentation to support your employment status and find a trustworthy lawyer who specializes in this field for critical advice on how to navigate your case. At éclat Law, we have experienced attorneys who have successfully helped employees fight against misclassification — contact us today for a free consultation and start confidently seeking justice!