Who is Considered an Independent Contractor?
What’s in a name? Well, more than you might think! Nowhere is this more applicable than in the discussion regarding employee/independent contractors. Possibly one of the most important—yet least well understood—elements of the FLSA (Fair Labor Standards Act) concerns the definition of an “employee.”
On the face of it, you would think the definition of an employee was fairly straightforward. Unfortunately, far too many employers misclassify their employees, usually to pay fewer payroll taxes and be responsible for less bookkeeping. In other words, just because an Ohio employer says a worker is an independent contractor rather than an employee does not necessarily make it accurate, and there are millions of workers across the nation that are misclassified.
An employer may misclassify an employee as an independent contractor because under FLSA, employees must be paid overtime for every hour worked over 40 (in a week) at time and a half. By contrast, independent contractors do not have to be paid anything extra for overtime. When it is left up to a court of law to determine whether a worker is an independent contractor or an employee, a six-factor “economic reality” test will be used. This test considers the following:
- Whether the relationship between the worker and employer is relatively permanent
- What degree of skill is required for performing the work
- Whether the work has a personal investment in equipment or materials for the job
- Whether there is an opportunity for profit or loss for the worker, depending on his or her skill level
- To what degree the employer controls how the work is performed
- Whether the work or services performed is an integral part of the employer’s business.
If the employer has a right to control how the work is performed, it is likely the relationship is one of employer/employee. According to Harvard Business Review, a significant portion of independent contracting doesn’t pass the “smell test.” A fully one-third of construction workers in the south were estimated to be misclassified, and state-level data shows that between 10-20 percent of employers routinely misclassify at least one employee.
Differentiating between an employee and an independent contractor is crucial for such issues as workers’ compensation, wage and hour laws, pension eligibility, and much more. While federal law may sometimes govern, state law generally resolves independent contractor situations that involve unemployment tax liability, state wage, and hour requirements, and unemployment tax liability.
How are Workers Misclassified as Independent Contractors?
Many businesses attempt to boost their workforce by hiring independent contractors to perform project-based tasks, short-term projects, or skill-specific jobs. The employers’ liabilities are reduced when independent contractors are hired, the employer also enjoys greater flexibility. Some businesses attempt to keep these independent contractors on staff without calling them an employee. Generally, the worker brings the situation to light, possibly even suing the business for denied benefits such as overtime pay, minimum wage, or health insurance. Since employers can face costly civil and criminal penalties for misclassifying workers as independent contractors, there should always be a defined program in place for avoiding such misclassification.
Independent contractors generally:
- Maintain control over how goods or services are provided—the worker controls how a job is done rather than the employer
- Are not subject to the guidance or control of the employer
- Have multiple clients
- Are considered “self-employed”
- Provide their healthcare and other benefits
- Pay their taxes
With more workers moving to offsite or at-home working conditions—even with some flexibility on the worker’s part regarding work hours—more employers are taking the opportunity to classify these workers as independent contractors, which is bad for the worker and could be equally bad for the employer. It is equally important to note that even if a worker agrees to be classified as an independent contractor, this in no way lets the employer off the hook for misclassification.
Are Independent Contractors Covered Under Ohio Workers’ Compensation?
On its face, the answer to this question is simple—Independent contractors are not entitled to workers’ compensation benefits in the state of Ohio. That being said, in some cases, an independent contractor who is injured on the job has options to recover compensation, including self-employed workers’ comp insurance, a personal injury claim, or a third-party liability claim.
- Few independent contractors have the financial means to carry their own workers’ comp insurance; however, this is one option.
- If the on-the-job injury was due to negligence on the part of the business owner or another individual, the independent contractor may be able to file a personal injury claim or third-party liability claim against the business or individual responsible for the injury.
But what about workers who have been misclassified as an independent contractor and are injured on the job? If a judge finds that a worker who has been involved in an at-work accident has been misclassified as an independent contractor, the worker may be entitled to receive full workers’ compensation benefits, including medical treatments, lost wages, and disability benefits.
How an Attorney from Schaffer & Associates Can Help a Misclassified Worker
If your employer has misclassified you as an independent contractor, and you were involved in an at-work accident, you need to speak to an Ohio Workers’ Compensation attorney as quickly as possible. This will ensure your rights are fully protected, and your attorney will work on your behalf to obtain the workers’ compensation benefits you are rightfully entitled to receive, as well as other benefits you were denied due to the misclassification.
At Schaffer & Associates, we will work hard to protect your future. We understand what a difficult situation you are currently in and will be the advocate in your corner that you need and deserve. Our attorneys have over 50 years of combined experience working with workers’ compensation, Social Security, and personal injury claims. Because of this, Schaffer & Associates know what it takes to obtain the highest level of compensation for your injuries. Contact Schaffer & Associates today for a comprehensive evaluation of your potential claim.