Employee Misclassification Lawyers
If you perform work for a business, your status as an employee or independent contractor makes a difference in what benefits you can expect to receive, including Social Security credits toward your retirement. Employees are paid recurring wages, and independent contractors are generally paid by the project, but your situation may not be so simple.
State and federal laws come into play for employees who are being treated as independent contractors.
Our employee misclassification lawyers have the knowledge and skill to figure out whether there has been a possible violation despite all of the nuances and regulations surrounding these situations. With all the different types of exemptions, our experienced attorneys could discern whether or not there has been a misclassification through questioning.
Our lawyers could pursue a lawsuit on your behalf for the unpaid minimum or overtime wages you should have been paid and other damages. If there has been a minimum wage violation, you may be eligible to obtain treble damages, which is what is owed in unpaid wages, and an additional two times this amount.
If there has been a violation that applies to a group of employees rather than just one employee, our firm also could pursue a class or collective action. For more information about how we could help you, call today.
What is an Employee?
An employee is someone who acts solely at the discretion of an employer. If an employer provides strict training programs and the tools required for workers to do their jobs and dictates when and where work is performed, the worker is an “employee” as defined by Ohio law and the FLSA.
What is an Independent Contractor?
By contrast, an independent contractor has more freedom. Independent contractors work when they wish and are responsible for obtaining their tools, but may still need to adhere to deadlines or quality control standards.
Benefits for Employees vs. Contractors
This distinction is important in considering the benefits available to the worker. Employers must provide workers’ compensation coverage for employees and pay the governing minimum wage for hourly work. The same is not required for independent contractors under the traditional definition.
Employers sometimes intentionally misclassify employees as independent contractors because it is cheaper for them. Employees are entitled to benefits such as holiday and vacation pay, sick days, and overtime pay at a higher rate that costs employers time and money to provide. Independent contractors do not receive benefits like these.
If employees are laid off, they are generally covered by unemployment insurance, while freelancers are not. Additionally, withholdings for Social Security and other deductions appear on employees’ W-2s, whereas freelancers are issued Form 1099s from which taxes are not withheld.
State and Federal Government Consider Employee Status
Employees injured on the job or who contract job-related illnesses, such as those who handle asbestos, are generally entitled to medical benefits and lost wages through the Ohio Bureau of Workers’ Compensation (BWC). However, employees misclassified as independent contractors would not receive these benefits in the event of an injury.
Because the federal government calculates Social Security payments based on payroll withholdings, misclassifying an employee as an independent contractor affects the benefit amount, he or she can collect at retirement. Employers who misclassify employees as independent contractors risk steep fines.
What is the Difference Between Exempt and Nonexempt Employees?
A nonexempt employee is someone who must receive minimum wages or compensation for overtime. This means that nonexempt employees are entitled to time and a half for hours worked over 40 or at least the state and federal minimum wage for all hours worked up to and above 40.
An exempt employee is someone who does not have to receive minimum wages or overtime. Some types of employees are exempt from just overtime pay while others may not receive either, such as outside sales employees. Some types of employees, such as supervisors of two or more full-time people, must receive minimum wages for hours worked, but they do not have to be paid time and a half for hours worked over 40 if they are salaried.
Exempt employees lack the right to receive minimum wages for all hours worked, the right to receive any pay for all hours worked, and the right to receive overtime pay. These individuals lack these rights under the statutes and laws that Congress and the state legislature have passed. However, exempt employees may have certain rights pursuant to an agreement with their employer. Therefore, if such a contract violation occurred, the exempt employee would likely have a contract claim, but they would not be entitled to extra damages. An attorney could review an individual’s exemption status to determine they have a viable employee misclassification case.
How Does a Job Description Impact a Misclassification Case?
In Ohio, the major distinction at issue in cases between exempt and nonexempt employees is job duties. Typically, whether an employee is exempt or nonexempt hinges on what they do daily at their job. If they are responsible for tasks that meet the legal definition of an outside sales employee, a professional, a computer employee, or an executive employee, they are exempt. However, the laws are often favorable for employees in this regard, and if they do not strictly meet those definitions or do not complete certain duties weekly, they are not exempt and should receive minimum wages or overtime. In general, the greatest distinction often comes down to an employee’s daily routine and responsibilities.
Consequences of Employee Misclassification
One of the consequences of an employer misclassifying an employee is that it may exempt this person from minimum wage or overtime pay. Employees are typically misclassified as either independent contractors, when they are really employees, or as supervisors, when they do not supervise two or more full-time employees or meet the definition of a professional under the applicable law. Both categories of employees are exempt from minimum wages or overtime pay. Therefore, by misclassifying an employee, the employer is saying that this person is not entitled to minimum wages, per the exemptions under federal and state law.
For example, car salesmen are exempt from overtime pay; likewise, supervisors of two or more full-time employees are exempt from overtime pay if they are paid a salary. If someone was misclassified as a supervisor and did not receive overtime pay that they earned, the court may rewrite their classification so that they receive not only proper compensation for their work, but also liquidated damages, attorney’s fees, and costs, depending on the case. It is important to note that the law may favor employees even if an employer’s classification falls near where it should not be. One of our wage and hour lawyers could help an employee fight for what they earned if their employer misclassified them.
Fair Labor Standards Act Guidelines
The United States Department of Labor (DOL) set parameters under the 2021 Fair Labor Standards Act (FLSA) for classifying employees and independent contractors. 29 Code of Federal Regulations Parts 780, 788, & 795 set forth an economic reality test posing two questions to determine employment status: How much does an employer control specific work? And how likely is it that the worker’s initiative will directly profit the worker?
A lawyer could apply other DOL identifiers in an employee misclassification case, including whether specific skills are required to perform the task, whether the relationship between the employer and worker is long or short term, and how the worker and employer interact. A Tittle & Perlmuter attorney can also help by contacting the Internal Revenue Service (IRS) to levy penalties and file a lawsuit on a misclassified employee’s behalf.
IRS Penalties for Misclassification
The IRS can levy penalties on the employer, including 100 percent of the matching Social Security and Medicare payments (FICA) and an extra 40 percent of the employee’s contribution. Interest will also be levied on the misclassified salary. If the IRS discovers fraud by the employer, other penalties can include an additional 20 percent of all wages paid to the misclassified employee and 100 percent of FICA payment, including the employee’s contribution. The IRS also levies $1000 fines for every misclassified employee, as well as imprisonment up to one year.
What Relief Can the Court Grant?
Besides the IRS penalties, a misclassified employee can ask an attorney to file a lawsuit against their employer. If a worker and their legal counsel can effectively prove that they were misclassified by their employer, the courts may award the following remedies:
Because a misclassified employee loses benefits and contributions to future Social Security payments, a local lawyer should become involved as soon as possible.