Worker misclassification occurs when an employer treats someone as an independent contractor even though the person legally qualifies as an employee. Pennsylvania law states that a worker is considered an employee unless the employer can show that the worker qualifies as an independent contractor. Unfortunately, according to the Pennsylvania Department of Labor and Industry, approximately 259,000 employees are misclassified each year in Pennsylvania. This can cost workers important protections, including benefits, unemployment, as well as lost wages. If you believe you have been misclassified as an independent contractor, an experienced employment lawyer will protect your legal rights and recommend the most effective legal course of action.
Employee vs. Independent Contractor: Why It Matters
In Pennsylvania, the distinguishing difference between employees and independent contractors is important because it determines which workplace protections and benefits apply to you.
- Employees generally work as part of an employer’s business and are subject to the employer’s control over how, when, and where the work is performed. Employees are entitled to a range of protections, including minimum wage and overtime rules, unemployment compensation, Workers’ Compensation, health insurance, and retirement plans. They receive a W-2 form at the end of the year and have taxes withheld from their paychecks.
- Independent contractors generally operate as an independently established business. They have greater freedom when it comes to how, when, and where the work is completed. Unlike employees, independent contractors generally handle their own business expenses and taxes, and are not entitled to the same employee benefits and protections.
“Classification” matters a great deal. For example, if you are an employee who has been misclassified as an independent contractor, you could lose out on the following employee protections:
- Pennsylvania unemployment compensation
- Workers’ Compensation coverage
- Minimum wage protections
- Overtime protections
- Certain wage-payment protections
- Employer-provided benefits, when applicable
- Other protections provided by state and federal employment laws
How Pennsylvania Decides Worker Status
In Pennsylvania, there is a presumption that a worker is an employee, not an independent contractor. To classify a worker as an independent contractor, the employer must show that the following are true:
- The worker is free from the employer’s control. The worker must be free from the employer’s direction and control over how the work is performed, both under the written agreement and in actual practice.
- The worker operates an independently established business. The worker must be customarily engaged in their own independently established trade, occupation, profession, or business.
In Pennsylvania, the law is designed to protect workers from being cheated out of their benefits and protections. Different industries have different rules, but “control” is the key concept. The following are examples of how Pennsylvania law defines “misclassification”:
- The Construction Industry Rules (Act 72). This states that a construction worker is legally presumed to be an employee unless the hiring company can prove very specific criteria. To be classified as a legitimate independent contractor in Pennsylvania construction, you must:
– Have a written contract to do the work
– Be free from control and direction in performing the work, both under your contract and in reality
– Customarily be engaged in an independently established trade, occupation, profession, or business of the same nature as the work being performed - General industries and the “Right to Control.” For industries outside of construction, Pennsylvania courts and agencies look closely at the economic realities of the relationship and the employer’s right to control your work. It is highly recommended that you consider the following questions:
– Who sets the hours? If the employer demands that you work a specific 9-to-5 shift, you look like an employee.
– Who provides the tools and equipment? If the company gives you a laptop, a uniform, or specialized machinery, you look like an employee.
– Can you work for others? If you are expected to work exclusively for one company and cannot take on other clients, you look like an employee.
– Who trains you? If the company requires you to complete mandatory training sessions on how to do your job, you look like an employee.
What You Lose When You Are Misclassified
Employers often misclassify employees as independent contractors in an effort to reduce labor costs and shift legal responsibilities. If you are misclassified as an independent contractor by your employer, you miss out on the following financial benefits and safety nets:
- Lower pay and higher taxes. As an independent contractor, you have to pay the “self-employment tax,” which means you pay both the employee and employer portions of Social Security and Medicare. This is an extra 7.65% out of every dollar, compared to a W-2 employee.
- No overtime pay. Under federal and state wage laws, employees who work more than 40 hours in a workweek are entitled to “time-and-a-half” pay. Independent contractors do not get overtime, which means that if you worked 60 hours in a week, you would not receive compensation for the 20 hours of overtime.
- Zero Workers’ Compensation. If you are injured while on the job, Workers’ Compensation covers your medical expenses and lost wages while you recover from your injury. However, if you are misclassified as an independent contractor, you may not be entitled to these benefits, resulting in massive medical bills and no income.
- No unemployment benefits. If business slows down and you are laid off, regular employees can file for unemployment benefits while they look for a new job. If you are misclassified as an independent contractor, you are not entitled to these benefits.
- No protection against discrimination. Workplace anti-discrimination laws are in place to protect employees from discrimination based on race, gender, religion, age, disability, or any other protected class. These protections may not extend to independent contractors, leaving you vulnerable to unfair treatment if your employer misclassified your employment status.
How to Recover Unpaid Wages and Benefits
If you were misclassified as an independent contractor by your employer, there are several steps you can take to recover lost wages and benefits, including the following:
- Collect evidence showing that you are an employee, including the following:
– Employment contract
– Pay stubs
– Timesheet and schedules
– Evidence that the company controlled your hours or work methods
– Emails, texts, and workplace messages
– Records showing you worked primarily or exclusively for the company
– Records of unpaid wages or unpaid overtime
– Employee handbook or workplace policies - Calculate the wages you are owed. If you should have been classified as an employee, you may have a valid claim for minimum wage and overtime. Pennsylvania wage laws require covered employees to receive at least the applicable minimum wage and 1.5 times the regular rate for hours worked over 40 in a week.
- File a Pennsylvania wage complaint. If your employer failed to pay you what you are legally owed, you may file an official complaint with the Pennsylvania Department of Labor & Industry’s Bureau of Labor Law Compliance. Keep in mind your claim must be filed within two years of the work being performed.
- Contact an experienced employment lawyer. If you believe you have been misclassified by your employer, an experienced employment lawyer can review your contract and working conditions, identify potential claims, and recommend the best legal course of action going forward.
Frequently Asked Questions (FAQs):
Can my employer retaliate against me?
If you are concerned that complaining about the misclassification will cause you to lose your job, an employment lawyer will review the facts, determine whether your employer’s conduct violated anti-retaliation laws, and ensure that your legal rights are protected.
Does receiving a 1099 prove that I am an independent contractor?
No, simply receiving a 1099 form does not by itself establish that you are legally an independent contractor. The underlying work relationship can still be examined.
Can I be misclassified if I signed an Independent Contractor Agreement?
Yes, signing a contract does not automatically determine your legal status. The actual circumstances of your work will still need to be considered when deciding whether you are an employee. An employment lawyer will review the details of the agreement and determine whether you were misclassified.
What wages will I be owed after a misclassification?
Depending on the circumstances, you may be entitled to unpaid minimum wages, overtime, and other compensation required by law. The amount you are entitled to will depend on your work history and the laws that apply to your situation.
Our Experienced Philadelphia Employment Lawyers at The Gold Law Firm P.C. Represent Employees Who Have Been Misclassified by Their Employers
If your employer misclassified you as an independent contractor, it is highly recommended that you contact our Philadelphia employment lawyers at The Gold Law Firm P.C. at your earliest convenience. We will discuss the details of your case, determine whether your rights have been violated, and negotiate the best possible settlement outcome. To schedule a free consultation, call today at 215-569-1999 or contact us online. With office locations in Philadelphia and Malvern, Pennsylvania, Pennsauken, New Jersey, and New York, New York, we proudly serve clients in the surrounding areas. *NYC, Pennsauken, and Malvern offices are by appointment only.
