The consequences of employee misclassification

Employee misclassification can result in employees not receiving full compensation for the work they have performed. It can also have tax and other implications which is why workers should know how independent contractors are classified as opposed to employees so they can ensure they are properly classified and receive the compensation they deserve.

What defines an independent contractor worker?

There are several factors to look at to determine if someone is a independent contractor including:

  • The extent to which the services rendered by the worker form an integral part of a business;
  • The permanency of the business relationship between the worker and the employer;
  • The amount of the worker’s own money is invested in equipment and materials for the job;
  • The worker’s opportunity for profit and loss;
  • The degree of independent business organization or operation of the worker;
  • The nature and degree of control of the worker and the employer;
  • The amount of initiative, creativity and foresight required for the worker to enjoy success against others offering similar services in the open market.

When evaluating whether or not a worker is properly designated as an independent contractor, it is important to look at the degree of independence or autonomy the worker has in performing their work. If they have a high degree of autonomy in terms of how the work is completed, they are likely an independent contractor. Employment law helps protect workers who are improperly classified by their employer.

Employee misclassification can be a serious concern for employees lose out in terms of compensation, rights and protections when improperly classified. For that reason, employees should be familiar with what the independent contractor designation means and who qualifies for it.