Independent Contractors and Employee Misclassification

Discuss Your Legal Options Today

No matter what industry you work in, employee misclassification is rampant. All workers who are misclassified as independent contractors when they are actually employees lose money.

If you are an independent contractor, you are responsible for paying Social Security and Medicare taxes.

Additionally, independent contractors are not eligible for unemployment benefits, workers’ compensation benefits, overtime pay, minimum wage, sick pay, or healthcare coverage.

An injury as an independent contractor could derail a worker’s entire financial stability because none of the financial safety nets that are available to employees are available to independent contractors.

If you are unsure about your status, contact the experienced employment law attorneys at GWC Injury Lawyers.

Our aggressive Illinois wage violation lawyers are ready to answer all of your employment law questions. Contact us today.

Worker Misclassification: Why It’s a Problem

Employers seek to misclassify workers so that they can avoid paying them overtime, minimum wage, workers’ compensation and other benefits. Employers can also avoid paying Social Security Disability, unemployment insurance, and Medicaid/Medicare when they misclassify workers.

When workers are misclassified, their rights as employees under both federal and state laws can be violated.

These violations include:

• Minimum wage violations
• Overtime pay violations
• Non-payment
• Off-the-clock work

Regardless of how an employer decides to classify a worker, the Internal Revenue Service (IRS) is the final determiner of who is considered an employee and who is considered an independent contractor.

The IRS considers three different categories to weigh the acts when determining the status of an employee, including:

• Behavioral: The IRS evaluates whether a worker has full control of what they do and how they do their job;
• Financial: The IRS also evaluates how the workers is paid, if expenses are reimbursed, and who is responsible for providing the tools and supplies necessary to complete the job; and finally
• Relationship: The IRS evaluates written contracts, employee benefits, whether the work is a key part of the business etc.

Determining whether someone is an independent contractor or an employee is a legal issue, and a statement or classification by the employer is not necessarily accurate.

For tax purposes, it is important for workers to know which category they fall into when determining their financial obligations and their labor rights.

Employees are subject to income tax withholding, the Social Security tax, and Medicare, while independent contractors are subject to the self-employment tax.

Independent Contractors in the Construction Industry

In Illinois, employers are required to abide by the terms of the Illinois Employee Classification Act (ECA), a law that went into effect on January 1, 2008.

This law governs who all public and private construction projects classify as individuals working in the construction industry.

Construction is broadly defined to include, but is not limited to:

Workers in the construction industry who are classified as independent contractors by their employers will be considered employees unless a company can prove that:

• They are free from employer control in the direction and performance of their job;
• The service they are performing is outside the usual services performed by the contractor who hired them; and
• The independent contractor is established in trade or business as a legitimate sole proprietor.

Under the state ECA, employers who misclassify workers may be subject to civil remedies assessed by the Illinois Department of Labor.

Employers may also be reported to the:

• Department of Employment Security
• Department of Revenue
• Workers’ Compensation Commission

Independent contractors cannot be fired for filing a complaint with the Department of Labor in order to challenge employment misclassification. Independent contractors who file a civil lawsuit to challenge their employment status cannot be fired either.

Additionally, employers who are found to knowingly violate the ECA may be subject to individual criminal and civil penalties.