As concerns about the slowing economy continue to grow, many businesses are seeking out ways to reduce overhead and increase slimming profit margins. Unfortunately, many of these corporations are doing so at the expense of the workforce by misclassifying employees as “independent contractors.” While the term “independent contractor” may seem like just a title, the distinction is important; while “employees” are entitled to basic benefits such as overtime and workers comp insurance, independent contractors are not. Employers can pay a worker classified as an independent contractor less than a worker classified as an employee even though the person is doing the very same work. While some workers are true independent contractors, many corporations have misclassified their employees as independent contractors in order to avoid paying those required benefits. Recently, our firm has been handling a number of these employee misclassification cases, in order to stop big corporations from lining their pockets at the expense of hardworking Americans nationwide. Roman Shaul and Dee Miles are the primary lawyers from the firm working on these cases.
Unfortunately, the problem is not isolated to any particular region or industry. In a hearing before the House Committee on Labor and Education, the Commissioner of the New Jersey Department of Labor and Workforce explained that “the primary reason that most employers choose to misclassify employees is a desire to avoid the employer costs of payroll taxes for Social Security, unemployment and disability insurance as well as other worker’s compensation insurance premiums.” The problem with these kinds of misclassifications is that they deprive workers of vital social services at the time they need them the most.
Independent contractors cannot claim unemployment or disability benefits, and are not paid the “time and a half” for overtime work that many workers need to make ends meet in this time of rapid inflation. Misclassification also hurts competition by creating an unlevel playing field for those businesses that properly classify employees. In addition, when dishonest corporations don’t pay their fair share, state unemployment systems are forced to raise contribution rates in order to make up for the shortfalls. While these costs are first shouldered by the thousands of misclassified employees who don’t receive their benefits, the American public also suffers because honest businesses that are forced to pay the higher rates will inevitably pass on that increase in cost to the consumer.
According to a Cornell University study, an average of over 700,000 workers per year in New York State alone were misclassified as independent contractors between 2002 and 2005, resulting in over $4 billion per year in underreported taxable income. Nationwide, the IRS estimated that 15% of employees were misclassified as independent contractors, the last time it studied the problem in 1984. Unfortunately, unless action is taken, that number will likely continue to grow as the number of workers classified as independent contractors increases. In 2005, the number of independent contractors nationwide had increased to over 10 million workers that do not receive overtime, unemployment insurance, or workers compensation – basic benefits that are even more important in periods of economic uncertainty. That number represents approximately 7.4% of the total workforce. As a result, it is more important now than ever for employees to know their rights. Our firm is doing its part to ensure that big corporations do not manipulate workers in the break room in order to increase shareholders dividends in the boardroom
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