In recent years, employee misclassification has become a significant issue, particularly as more companies rely on freelance or contract labor. While flexible arrangements can offer certain benefits, they also raise concerns when workers are denied wages, benefits, and legal protections because they are labeled as independent contractors when they should legally be considered employees.
Key Differences Between Employees and Independent Contractors
The distinction between an employee and an independent contractor goes far beyond job titles. It affects everything from tax obligations to eligibility for Workers’ Compensation, unemployment benefits, and legal protections under wage and hour laws. While businesses might prefer independent contractor arrangements for their cost-saving potential, workers must be cautious about misclassification, which can leave them without essential protections.
Employees typically work under the direct control and supervision of their employer. They follow a schedule, use equipment provided by the employer, and perform work that is central to the business’s operation. In contrast, independent contractors often use their own tools, control how and when they work, and may provide similar services to multiple clients. While independent contractors enjoy a greater degree of autonomy, they also assume more risk and responsibility, including paying self-employment taxes and securing their own insurance coverage.
In New Jersey, the law favors a clear, structured approach to determining whether a worker is truly an independent contractor. The “ABC test” is commonly used to evaluate classification. Under this test, a worker is presumed to be an employee unless all three of the following criteria are met: (A) the worker is free from control or direction over the performance of the work, both under the contract and in practice; (B) the service is performed outside the usual course of the business or outside all the places of business of the company; and (C) the worker is customarily engaged in an independently established trade, occupation, profession, or business. Failing to meet any one of these conditions may indicate that the worker should be classified as an employee.
For example, if a delivery driver is required to wear a company uniform, follow specific delivery routes, and work scheduled shifts, it is likely that this person should be classified as an employee rather than an independent contractor. Misclassification in this case could result in the worker being unfairly denied overtime pay, health benefits, or unemployment insurance.
How Misclassification Can Affect Workers’ Rights and Income?
Misclassification is not a minor paperwork issue—it can have a significant impact on a worker’s financial well-being and access to legal protections. Employees are entitled to a minimum wage, overtime pay, and protection under anti-discrimination laws. They may also be eligible for Workers’ Compensation and unemployment benefits. Independent contractors, on the other hand, are generally excluded from these rights and benefits.
One major concern is that misclassified workers may not receive overtime pay, even if they routinely work more than 40 hours per week. In addition, they may be required to pay the full amount of Social Security and Medicare taxes, whereas employees share this tax burden with their employer. Misclassified workers are also at risk of losing health insurance coverage, paid time off, and other employment-related benefits.
Beyond the financial implications, workers who are misclassified may find it more difficult to assert their rights in the workplace. For instance, if an independent contractor faces discrimination or harassment, legal protections may be more limited compared to those available to employees. Similarly, misclassified workers may have little recourse if they are terminated unfairly or denied wages.
Employers who misclassify workers—whether intentionally or through misunderstanding—can face serious legal and financial consequences. However, it is often up to the worker to raise concerns and seek clarification about their classification. If you suspect that you have been misclassified, it is advisable to speak with an employment law lawyer who can help assess your situation and determine the best course of action.
A South Jersey Workplace Discrimination Lawyer at The Law Offices of Leo B. Dubler, III, LLC Helps You Understand Your Rights
If you believe you may have been misclassified as an independent contractor, you have options. Speak with a South Jersey workplace discrimination lawyer at The Law Offices of Leo B. Dubler, III, LLC today. For a free consultation, call 856-235-7075 or submit the provided online contact form. With offices located in Mount Laurel and Atlantic City, New Jersey, we proudly serve clients in Cherry Hill, Burlington County, Camden County, and South Jersey.