How Companies Benefit from Calling You an Independent Contractor

Should You Have Employee Status?

There are upsides to being an independent contractor. You have more freedom than a salaried employee—that is, when it comes to what you’re paid, when you work, and how you do your job, you’re the one who sets the terms.   

But you’re also not entitled to certain benefits. Companies get a lot out of misclassifying employees as “independent contractors” while treating them like salaried employees. In some cases, this may be unlawful—and it can rob you of key workplace protections.

Here’s an overview of reasons why employers deliberately misclassify their employees—and how to tell if they’re doing it to you.

It Costs Them Less to Call You a Contractor

Full-time employees don’t just pull in a salary. They may also get overtime and unemployment compensation, employer-sponsored health care, family and medical leave, paid time off, retirement plans, and other benefits.

Those benefits are expensive—but if the employer calls you a contractor, they don’t have to pay for any of it. You take on the responsibility, expense, and risk of paying for your own time off, retirement, and healthcare. The company just has to pay your wage.

They Don’t Have to Watch out for Your Safety as Carefully

When you’re self-employed, companies may be less concerned about being fined for OSHA violations or paying workers’ comp if you’re injured. This means that in some situations, companies may have less incentive to ensure that your work conditions are safe. Just another opportunity for them to reduce their costs—at your expense.

You Have to Pay All Your Own Taxes

Independent contractors pay their own federal and state payroll taxes—making both the employer and employee contributions. Employers only have to make those contributions for full-time employees.

They Can Shift More of Their Costs Onto You

If you’re a contractor, you may have to provide your own tools and equipment, netting huge savings for the company.

Uber works like this, with its drivers using their own vehicles for work (and paying for all the maintenance, gas, and other costs). So does Airbnb, whose hosts use their own homes and take on all the expenses and risks. Office workers may need to provide their own computers.

A 2017 story in USA Today  provides an extreme example of this. A short-haul trucking company misclassified its drivers as independent owner-operators—forcing them to buy their own vehicles and get them modified to comply with strict emissions restrictions.

The employer provided financing for this, but then deducted repayment from the truckers’ paychecks—taking most of their pay in the process.

Are You Being Misclassified? Questions to Ask

These questions can help you determine whether, as a whole, you fall closer to the “employee” or “contractor” side of the divide.

Do you share some of the risk and cost of the business? Are you expected to hire other subcontractors, or invest in facilities or equipment to get the job done? If yes, you’re probably an independent contractor. If no, you may be an employee.

Are you in open competition with other workers? If you’re competing with other workers to land an individual project, then you may be an independent contractor. If not, you may be an employee.

How permanent is your gig? Is your current gig short-term or project-based? Or are you working with that company more or less indefinitely? If your work is steady and ongoing with no end date in sight, chances are you’re actually an employee.

How much control does your employer have over your day-to-day? If you’re an independent contractor, your employer generally isn’t watching over your shoulder quite so much.

The self-employed often set their own fees, decide when and where they work, and determine how to get a job done. All of this may not be true of every contractor—but it’s the general trend.

If your employer dictates everything—from what you get paid to where and when you work, to the minutiae of how you do your job—then you should probably be classified as an employee.

Call Us for a Free Consultation Now

If you suspect you’re being misclassified, talk to an employment lawyer. A knowledgeable lawyer can help you get to the bottom of it—and get the benefits and rights you’re entitled to. Give us a call at 267-273-1054 or email us at murphy@phillyemploymentlawyer.com for a free consultation.