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Hired as an Independent Contractor? Consider an Employment Attorney
If you are reading this, you may have already been taken for a ride by a dirty employer and need to find yourself an employment attorney. You probably responded to some sort of classified ad claiming that you can be your own boss and make lots of money in sales. You attended some sort of training, were given supplies or tools to perform your job, and signed an independent contractor agreement. Your employer had complete control over your scheduled working hours, where, when, and how you performed your job. You worked more than 8 hours a day, were not given rest periods, lunch breaks, and were paid nothing or very little compared to the amount of time you actually worked.
Many victims of this type of unethical, illegal behavior by employers are first-time workers because they are young and naïve; however, since the recession, adult men and women who are in desperate need of a job are joining the list of those who are being taken advantage of by being misclassified as independent contractors.
Most people might be under the impression that since they signed an independent contractor agreement they have no recourse—that you are unable to obtain unemployment or receive back-pay for the work you performed—and that is simply not true.
(To be fair, some employers ignorantly decide to hire or reclassify employees as independent contractors in order to cut costs; however, by doing this, when a company’s employees are not actually independent contractors, companies are breaking multiple laws.)
Why do company's hire independent contractors?
There are numerous monetary benefits for companies to hire employees as independent contractors. Companies do not have to:
-pay minimum wage or abide by rest periods and meal periods
-pay any taxes on payroll
-provide worker’s compensation insurance
-pay unemployment insurance
However, if a company misclassifies an employee as an independent contractor, the consequences are numerous and include:
-a government audit
-payment on back taxes
-fines and penalties for non-payment of taxes
-individual and class-action lawsuits that include payment of lost wages and benefits and could include, depending on each state, awards for attorney’s fees and costs. (This is why most employment attorneys will take a case on a contingency basis, meaning that clients pay no up-front costs.)
Are you really an independent contractor?
The key factor in the determination of whether or not someone is an independent contractor is to ask if the company has control over you and/or the right to control the work done and the means in which the work is performed. If a company has control over how you perform your job, the company might be misclassifying your employment status, and you should be considered an employee.
Because there is different criteria in determining whether or not a worker is an independent contractor or an employee under different laws (like sexual harassment, worker's compensation, etc.), I’ve listed below factors cited by the IRS—not all factors must be met. Keep in mind two things when reviewing the list:
First, most independent contractors realize that they are independent contractors—so, if a company has hired you on as an independent contractor, and this is news to you because you are not self-employed, it should be a good self-indicator that you are not an independent contractor.
Second, some of the factors below include the reasons why companies will misclassify employees (to avoid paying you), so I have put in bold the key factors to review that might be indicators you are not an independent contractor (the ones in plain text are usually a company's benefit of misclassifying employees).
No Instructions. Independent contractors are not given instructions in order to accomplish a job.
No Training. Independent contractors don't normally require training by a company.
Independent contractor's work not essential. A company's success does not depend upon the services of independent contractors. For example, a law firm is unable to call their attorneys independent contractors.
No permanent relationship. Independent contractors usually work irregularly, when work is available, and/or are on call.
Independent contractors control their own workers. Independent contractors hire their own workers and pay their own workers.
Other jobs. Independent contractors have enough time to pursue other avenues of work besides only one, sole company.
Location. Independent contractors decide where they work. A hiring company does not decide a location, and the work is not under the company's direction and/or supervision.
Order of work. Independent contractors, not the company, determine the order in which they will perform their work.
No interim reports. Independent contractors shouldn't be asked for progress reports.
Multiple Firms. Independent contractors usually work for multiple companies/firms.
Own tools. Independent contractors usually supply their own tools.
Significant investment. Independent contractors should be able to perform their job duties without a company's machinery, supplies, or other company facilities.
Services available to the public. Independent contractor's services are made available to the the public by one or more of the following ways:
1) having an office/assistants;
2) having business signs;
3) having a business license;
4) listing services in a business directory; or
5) advertising services.
Profit or Loss possibilities. Independent contractors should be able to make a profit as well as a loss. Employees are unable to suffer a loss. There are five circumstances that indicate a profit or loss is possible:
1) the independent contractor hires, directs, and pays assistants/employees;
2) the independent contractor has his own office, equipment, and/or supplies;
3) the independent contractor has liabilities;
4) the independent contractor agrees to perform specific jobs for a price agreed upon in prior to performing the jobs; and
5) the independent contractor's services affect his own business reputation.
Can't be fired. Independent contractors cannot be fired if the independent contractor meets contract specifications.
No hourly pay. Independent contractors are paid on a per job basis.
Business expenses. Independent contractors are usually responsible for business expenses they incur.
No time clock. Independent contractors determine their own schedules.
No compensation if the job isn't done. Independent contractors may be obligated to compensate a company if they do not satisfactorily complete a job.
If you were hired or reclassified as an independent contractor by an employer, and some of the above does not pertain to you, you should consider contacting an employment attorney—initial consultations are almost always free. Don’t let these types of companies get away with what they did to you, and don’t allow them to continue to take advantage of people.