Detroit Contractor Misclassification Lawyer
Are You an Independent Contractor or an Employee?
Hiring employees is expensive. Employers must pay a share of their employees’ payroll taxes and maintain workers’ compensation coverage on top of whatever voluntary benefits they provide (such as health insurance). Most employees are also entitled to overtime pay and protected by law from unsafe workplaces and exploitation.
Independent contractors are much cheaper for companies because they aren’t entitled to these benefits, which makes classifying workers as independent contractors highly beneficial to employers. In addition to directly reducing payroll costs, misclassifying workers allows employers to avoid many types of state and federal taxes, regulations, and potential liability.
Whether a worker is properly classified as an employee or independent contractor isn’t an employer’s decision. State and federal rules establish criteria for determining whether a worker qualifies as an independent contractor. In addition to protecting workers, government regulation helps ensure employers pay their fair share in taxes and reduces workers’ need for government assistance.
What Is an Independent Contractor?
An independent contractor performs work for another person or company but is not an employee. In other words, an independent contractor is a self-employed person who works on a contract basis. They may control how and when they perform their job duties, set their own schedule, negotiate their pay, provide their own tools, and are responsible for their taxes and insurance.
How Common Are Independent Contractors?
In the past, classifying workers as independent contractors was relatively rare. It was typical in specific, specialized industries, including accounting, construction, maintenance, and healthcare, but uncommon in the general workforce. However, as the workplace has shifted away from traditional full-time employees, many workers are now classified as independent contractors.
Independent contractors now work in all industries, but they are still more prevalent in certain jobs. Some areas in which independent contractors are most common include:
- Accounting and finance.
- Administrative services.
- Computer and IT services.
- Customer service providers.
- Education and training.
- Medical and healthcare.
- Project management.
- Research analysts.
- Software development.
- Writing and editing.
Sometimes employers intentionally or recklessly misclassify an employee as an independent contractor, while other times, they make a legitimate mistake. Whatever the motivation, employees can pursue legal action against an employer for misclassifying them as independent contractors. The damages in these types of claims depend on the benefits a worker lost due to the misclassification.
How Do Courts Determine Whether a Worker Is an Employee or an Independent Contractor?
Both state and federal laws protect workers and assign employers responsibilities. State laws may vary slightly in the factors they use to determine whether a worker is an independent contractor or an employee. However, for the most part, the analysis involves considering the following criteria.
Level of Instruction and Control. The more instruction an employer gives a worker, the more likely that worker is an employee. Generally, independent contractors are offered a job and can complete it however they want. On the other hand, employers can exercise control over how employees complete their work and fulfill their job duties (e.g., where and when they work, the tools they must use, etc.)
Amount of Training. Workers who must participate in extensive training are likely employees. Extensive training provides a worker with instruction about how to do their job, indicating an employer/employee relationship. Independent contractors are likelier to have completed most of their training elsewhere.
Assistants. While having an assistant doesn’t necessarily move the needle in one direction or the other, if a company pays for and decides whom to select as a worker’s assistant, the worker is more likely an employee.
Flexibility of Schedule. Workers told by a company when or where they have to work are likelier employees. Independent contractors can generally work whenever and wherever they want if they get the job done.
Method of Payment. Most employees are paid based on hours worked or receive a weekly or monthly salary. Independent contractors are typically compensated through commission-based or project-based structures.
Payment of Expenses. If an employer covers the costs of a worker’s expenses, such as hotel rooms, gasoline, rental cars, or other business-related costs, it suggests an employment relationship. Generally, independent contractors set their rates to build these costs into their fees.
Company-Provided Tools. If a business provides the tools necessary for a worker to complete the job, it suggests the worker is an employee rather than an independent contractor. Independent contractors are usually assumed to own the tools needed to complete their work.
Ability to Work for Multiple Companies. One of the hallmark characteristics of an independent contractor is that they can work for whomever they want. If an employer forbids or significantly restricts a worker’s ability to work for other companies, the worker is likely an employee.
Courts consider these and any other relevant factors in determining whether a worker is an independent contractor or an employee on a case-by-case basis. Because a worker who believes they are misclassified must initiate a complaint to trigger this review, many employers default to classifying workers as independent contractors. Unless employees challenge this classification, their employer will enjoy the benefits while the workers are deprived.
Employees who challenge misclassification have succeeded against many prominent employers, including Amazon, Microsoft, FedEx, Lyft, Apple, and AT&T. The plaintiffs in these lawsuits were able to recover significant damages and implement procedures to avoid future misclassification of other workers.
Workers who believe they have been misclassified as independent contractors should contact an experienced Michigan wage-and-hour attorney for immediate assistance.
Frequently Asked Questions:
My Employer Says I’m an Independent Contractor. Are They Correct?
Companies make the initial determination regarding whether a worker is an independent contractor or an employee. Ideally, they evaluate and apply the factors discussed in this article to the worker’s engagement. However, an employer may misclassify a worker either intentionally or mistakenly. Workers who believe they were misclassified as independent contractors should consult an experienced Michigan wage-and-hour lawyer to evaluate their situation and options.
Can Companies Terminate Independent Contractors for No Reason?
A company’s ability to terminate an independent contractor depends on whether a contract exists between the independent contractor and the company and, if so, the contract terms. Many independent contractor agreements contain provisions limiting a company’s ability to terminate the relationship unilaterally. However, if there is no contract or the contract has no limiting language, a company can generally terminate the services of an independent contractor for any reason or no reason.
Can Independent Contractors Sue a Company for Discrimination?
As a general rule, unless there is language in the independent contractor agreement stating that an independent contractor cannot be terminated based on discriminatory reasons, courts have held that independent contractors cannot pursue discrimination or wrongful termination claims against a company. However, there are a few exceptions. First, if the company harasses an independent contractor (or permits employees to harass them), they may be liable for a workplace harassment claim. Additionally, it may be possible to bring a discrimination claim against a company if a worker can prove they were actually an employee misclassified as an independent contractor.
Contact a Michigan Independent Contractor Attorney
If you believe you have been misclassified as an independent contractor, contact the wage-and-hour lawyers at Sommers Schwartz, P.C. We have over a century of combined experience advocating for workers. We can help you determine if your employer misclassified you as an independent contractor and, if so, what your options are.
At Sommers Schwartz, we dedicate ourselves to representing employees and independent contractors across Michigan in workplace discrimination claims and other employment-related matters, including wage-and-hour claims. While these cases can be challenging, our experienced Detroit employment lawyers have devoted their careers to enforcing workers’ rights. To learn more, and to speak with an attorney about your situation today, call 800-783-0989 for immediate assistance.