Misclassification as Contractors Hurts Government, Employees

When is an employee not an employee? It depends on how a worker is classified by an employer. Full-time employees are eligible for benefits -- and are also required to be paid overtime, where applicable, and fair wages. Employers must also pay insurance and employment taxes for full-time employees, which can add up to significant expenses for businesses.

During the recent recession, which hit many Texas businesses hard, a lot of employers elected to classify workers as contractors, rather than employees -- a decision that might have saved them money, but is in many jurisdictions illegal.

The savings could be substantial for employers in this situation. A worker earning about $43,000 per year, for example, would have an employer pay about $3,700 in employment taxes on average.

Obviously, this is fraudulent behavior on the part of employers who are simply looking to save money. These are funds that would otherwise go to the government. Additionally, workers who would be eligible to receive employer-sponsored insurance and overtime are cheated out of these important benefits of being a full-time worker.

In many cases, employees who find themselves in this situation are reluctant to come forward. This is because they fear retaliation, often in the form of losing their job. In addition, workers in this situation often make less than their full-time counterparts; furthermore, workers wrongly classified as contractors aren't eligible for workers' compensation insurance benefits if they are hurt on the job.

Texas workers who feel they are being improperly classified can consult with an experienced employment law attorney.

Source: Insurance Journal, "States Going After Employers Who Misclassify Workers as Independent Contractors," Jim Efstathiou, Jr., Oct. 18, 2013