Misclassification of Independent Contractors

I have written about this issue of misclassification in our firm’s class action blog, but my firm’s recent filing of a lawsuit on behalf of misclassified Allstate agents reminded me again of the significance of this issue. Millions of workers are intentionally misclassified by their employers as independent contractors. Some of the reasons employers misclassify workers may be to avoid paying overtime compensation, workers compensation, family medical leave and/or unemployment benefits, among others.

Using common sense can help you determine whether you’ve been misclassified . The IRS employs an Eleven Factor Test or Hybrid Test to determine whether the an independent contractor classification is correct.Generally, if your employer is exerting significant control over your daily work activities, the potential for misclassification exists and you may be entitled to unpaid wages and benefits. In other words, the more the employee is in control over when and how the work is performed, the more likley it is the worker will be found to be an independent contractor. In addition, courts examine whether the employer is the employee’s primary source of income. The more the employee operates independent of his or her employer in incurring the costs associated with the job, the more likely it is that the employee is an independent contractor. And just because your employer labels you as an independent contractor – this does not mean you are an independent contractor – labels mean very little.

Beginning this Thursday, Februrary 10, 2011, Pennsylvania’s new construction worker independent contractor law goes into effect. The law, entitled the “Construction Workplace Misclassification Act” provides criteria for classifying independent contractors with the construction industry.

In order to be properly classified as an independent contractor, the Act states that an individual meet certain criteria, including: (1) have a written contract to perform construction services; (2) be free from control over the performance of such services; and (3) be engaged in an independently established business with respect to such services.

In addition to the recently-addressed construction worker independent contractor issues, there have been multiple large settlements involving delivery companies and their drivers. In one involving 3P Delivery, it was alleged that 3P engaged in fraud by making it appear that its drivers were independent contractors running independent businesses, when its drivers were really 3P employees. AFter court-ordered mediation, the parties settled the lawsuits for $2.25 million.

If you believe you have been misclassified, it is important to contact an attorney as soon as possible because claims for unpaid overtime can only extend back three years. So, the longer an employee waits to bring a claim, the less unpaid overtime he or she would be able to recover.