Am I an Employee or an Independent Contractor?
A business might pay an independent contractor and an employee to perform the same work, but there are several important differences between the two.
Is it Better to Be an Independent Contractor or an Employee?
Generally, it’s more beneficial to be employed as an employee rather than an independent contractor. As an employee, there are more laws protecting taxes, minimum wage, overtime, employee benefits, and more.
“Independent contractor” situations often trigger overtime compensation claims and occasionally minimum wage claims. Additionally, ERISA claims can arise if the “contractors” aren’t allowed to participate in the company’s employee benefit plans.
Why Do Employers Want You to be an Independent Contractor?
For many employers, it’s much cheaper to classify an employee as an independent contractor rather than an employee.
Three of the biggest reasons employers may misclassify an employee as an independent contractor are to avoid paying:
- Payroll Taxes – Employers do not have to pay taxes on independent contractors.
- Minimum Wage Overtime – Minimum wage and overtime laws do not apply to independent contractors
- Employee Benefits – Employers do not have to offer health insurance, life insurance, disability benefits, and other employee benefits to independent contractors
3 Reasons Why an Employer May Misclassify You as an Independent Contractor
Transcript: Hey everybody, attorney Scott Perlmuter here Cleveland’s wage and hour lawyer here to talk to you today about independent contractors versus employees. A lot of people call in wanting to know is it better for me to be classified as an independent contractor or as an employee? Now typically a worker is going to want to be classified as an employee and its more beneficial to them as opposed to an independent contractor and there are 3 main reasons why a company may want to misclassify you as an independent contractor to benefit them and to injure you. The first reason is payroll taxes. You’ve probably seen on pay stubs for companies that you’ve been classified as an employee of that you’ve got these deductions for taxes, for social security and for Medicare. Now if you’re classified as an independent contractor your employer, the company, does not have to pay anything on your behalf for those taxes but if you’re classified as an employee, they have to kick in based on your salary or your wage half of those social security and Medicare taxes. So, it’s beneficial from a tax standpoint for the employer to misclassify you as an independent contractor so they don’t have to pay those taxes. Number 2 is minimum wage overtime; The minimum wage and overtime laws, the federal and state laws for minimum and overtime apply to employees but do not apply to independent contractors so there’s no law that says that you have to pay your independent contractors a minimum wage in Ohio that’s $8.55 per hour this year, or that they have to pay you overtime of time and half for hours worked over 40 a week, so that’s another advantage of an employer classifying their workers as independent contractors as opposed to employees. Third, employee benefits, so if a company covers health insurance, life insurance, disability insurance, to its employees it does not have to offer those same benefits to independent contractors so that costs money for the employer to offer employee benefits to its employees so they want to save money by not offering that to all the people that work for them, they may misclassify you as an independent contractor to avoid having to include you in those programs. So, if you have questions about your particular situation whether you’ve been misclassified as an independent contractor whether your company can save money on your employment, give us a call, send me an email, go to our website: tittlelawfirm.com. We’ve got a separate website thats got all sorts of information about overtime page laws, minimum wage laws, employee benefit laws. That’s overtimelawyers.com. (For truth. For justice. For you.)
Contact Tittle & Perlmuter – Cleveland Wage and Hour Lawyer
If you have questions about your classification by your employer and whether you are an employee or an independent contractor, contact a wage and hour lawyer for help.
For specific information on more wage and hour issues, visit www.overtimelawyersohio.com.