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Misclassification can cost workers their rights

| Dec 28, 2016 | Employee Rights |

Many New Jersey workers are entitled to employee rights like a mandatory minimum wage and overtime compensation. Employment laws also allow workers to claim workers’ compensation benefits if they are injured and unemployment benefits if they are laid off. However, workers that are classified as independent contractors are not entitled to these same rights.

The U.S. Department of Labor is concerned about a growing trend in the workplace that is preventing workers from receiving the benefits of employment. Many employers are misclassifying their workers as independent contractors when the workers should actually be classified as employees. When employers do this, they save money in payroll taxes, and their workers lose their rights and benefits.

The Wage and Hour Division of the DOL has cracked down on a company that was attempting to evade employment laws by misclassifying its employees. The construction employer told workers who had once been employees that they must become owners of limited liability companies. After the workers formed LLCs, they lost their employee rights though they continued to perform the same type of work for the employer. The employer was caught running the scheme in Utah, but it moved to Arizona and did the same thing. The DOL eventually recovered back wages and damages from the employer totaling $600,000.

There are other issues that arise when people who legally are employees are misclassified as contractors. They lose their eligibility for the company’s retirement plan, and they are required to pay a variety of taxes that would ordinarily be withheld from their paychecks. For these reasons, they may want to meet with an employment law attorney to see what can be done to correct the situation.