If you are working in a company you can be considered an independent contractor or an employee. Often an observer can’t tell the difference between the two categories. Employees and contractors can be working side by side doing the same work. You can’t even always tell by job title. Job titles are often changed around to try to get around one legal obligation or another. However, there are important differences with regard to your relationship to the company and to management.

How you are classified will determine your rights.

Employees are supposed to receive employment benefits such as health and disability insurance. They are not supposed to incur costs or make investments in their work. They are supposed to receive a net salary with income tax, Social Security and Medicare taxes or premiums are withheld. They are supposed to receive workers’ compensation in the event of work-related injury or illness. They are supposed to receive unemployment compensation after a termination or layoff. Generally, employees can be terminated only for good cause and with notice (unless their employment contract states they can be terminated at will).

Contractors are technically people who operate a business of providing a consulting service. They are supposed to be working out of their own office. They receive fees, not salary. They usually charge fixed fees and receive no overtime pay. They do not receive any of the extra benefits that employees receive and they are expected to make investments in their work. Contractors can be terminated at any time for any reason unless the employer (or client) has a specified legally binding contract to a specific term).

Misclassification of employee status.

The obligations employers legally have toward their bonafide employees often make it better for them to hire people as contractors and simply treat them like employees. A growing number lawsuits allege that companies are classifying workers as free agents when they are really under the constrictions of employees. Misclassification of employees is the way many employers save themselves from paying overtime and avoid paying out other benefits. It is also a way some employers avoid restrictions on termination, removing the rights of the terminated employee.

The U.S. Department of Labor explicitly says that it is not up to the employer to determine if someone is a contractor or employee. The economic realities of the working relationship determine if a worker is really an employee.

If You are Terminated.

If you are classified as an independent contractor, free agent, or consultant, you should seek legal counsel to determine if the classification is justified.

If you are an employee forced out of employment, there are legal structures on your side. Employers have to make sure their termination will stand up in court. An employee can examine the way he or she was terminated. Legal options are available. If you are a bonafide employee you could seek legal counsel to look at the way you were terminated.

Aiman-Smith & Marcy is committed to eradicating unethical business practices that large corporations too often inflict on employees, consumers, and businesses. We are high-performance, boutique law firm dedicated to upholding your rights. Please contact us to learn more.

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