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3 issues that could lead to an employee misclassification lawsuit

On Behalf of | Apr 15, 2024 | Civil Litigation |

Businesses often need to hire when they grow, or when existing workers retire or take new jobs elsewhere. Acquiring new talent means accepting quite a bit of financial responsibility. The employer must pay for a salary and benefits. There could be costs associated with training as well.

Many organizations want to keep the cost of staffing as low as possible. They might exert careful control of hiring practices as a way to minimize operational expenses. Sometimes, companies hire workers as independent contractors but then treat them like employees. Misclassification violates the law and the rights of employees while potentially benefiting the business.

Occasionally, the workers involved in a misclassification scenario eventually take legal action against the businesses involved. What may prompt an employment-lawsuit related to worker misclassification?

A sudden injury

Employees who get hurt on the job suffer double economic consequences. They have medical expenses to address while also losing their wages until they recover. Workers’ compensation benefits can pay for healthcare costs and replace lost income, but independent contractors are not eligible for workers’ compensation coverage typically unless they self-insure. Independent contractors with work-acquired health issues might initiate litigation claiming misclassification has resulted in an unfair denial of benefits.

An unexpected job loss

Technically, independent contractors only work with the company for the duration of specific projects. Unlike employees, who work for an organization indefinitely, independent contractors may only perform a single multi-week task for the company and then move on to their next arrangement. If someone has consistently worked as an independent contractor performing tasks related to the core of the business’s purpose, that individual might expect unemployment benefits when the company suddenly terminates their agreement. Workers who realize they cannot obtain unemployment because their independent contractors may try to assert that the company misclassified them.

Overtime issues and other wage claims

Sometimes, a realization that a worker has not received Fair wages is what leads to a misclassification lawsuit. A worker may realize that they have put in so many hours that the company did not pay them minimum wage or that they should have received overtime wages for their labor. They might then pursue a misclassification lawsuit as a way of demanding fair pay. Issues with income taxes might also sometimes lead to workers taking legal action, as they may find themselves far behind on income taxes without an employer withholding on their behalf and contributing towards the total taxes owed.

Cases involving civil litigation, such as employment contracts related to worker misclassification, may require careful contract review and analysis. Those who learn more about federal rules for worker classification may have an easier time evaluating a dispute related to an employment arrangement and making informed choices accordingly.