The “gig” economy has exploded in recent years. Nearly 55 million people work freelance, representing almost 35% of the workforce. These numbers are expected to increase in the coming decades.
There are many reasons employers like hiring freelance or 1099 workers instead of making them employees. For one, employers can avoid paying unemployment tax and workers’ compensation insurance. For another, employers protect themselves legally if the independent contractor makes an error or causes injury.
Unfortunately, employee misclassification is a serious problem in our state. Contact one of our Elizabeth, New Jersey misclassified employee attorneys for assistance.
How New Jersey Defines Independent Contractor
If a worker is not an independent contractor, then they are an employee. It is that simple. New Jersey has adopted a strict test for determining whether a worker is really an independent contractor.
This area of law is in flux, but the most common test used is the “ABC” test. Under this test, a worker is an employee unless the employer meets all of the following:
- The worker is free from the direction and control of the employer with respect to how the work is performed. This must be true under the terms of the service contract, as well as in fact.
- The work performed is either outside the employer’s usual course of business or the work is performed away from the employer’s place of business.
- The worker is engaged in an independently established trade, business, occupation, or profession.
For example, an event planner who has her own business and works independently is likely an independent contractor. She might work from home and have many clients as part of her established profession. However, if she only works for one big business client and does all of her work at their headquarters, then she is probably an employee.
How Misclassification Harms Workers
When workers are misclassified, they lose important protections:
- Right to overtime pay for hours worked in excess of 40 in a week
- Minimum wage protections
- Protections against workplace discrimination
Employees who are misclassified can also lose out on important benefits, such as unemployment compensation when they lose a job.
Independent contractors also must pay more in taxes, which reduces the amount that they take home. All of these harms cost New Jersey workers millions or more each year, with employers who engage in misclassification reaping the ill-gotten gains.
Industries Prone to Misclassification
Any employee could be misclassified in any industry. According to the Economic Policy Institute, up to 20% of employers misclassify at least one worker. But some industries are more prone to misclassification than others:
- Real estate
- Delivery services
- Creative arts
- In-home care
Misclassification is so widespread that it is hard for regulators to root it out. Fortunately, affected employees can make a claim to receive the benefits they have been denied, but they should hire appropriate legal counsel.
Contact an Elizabeth, NJ Misclassified Employees Lawyer Today
Sattiraju & Tharney, LLP has helped many misclassified employees obtain the wages and benefits they are entitled to. Call our firm to set up a meeting to review your situation.