Federal wage-and-hour lawsuits against employers are at an all-time high. In fact, the number of employee lawsuits has quadrupled in the last 10 years, according to government figures.
A big reason for this is a sharp jump in claims that a company improperly treated an employee as an independent contractor.
Of course, more and more businesses these days want to treat their workers as “contractors,” because they can avoid overtime rules, payroll taxes, employee benefits and medical leave requirements.
Surprisingly, there’s no single, clear test to distinguish an employee from a contractor. In general, though, a worker might legally be an “employee” is he or she has worked steadily for the business for a long time, doesn’t perform work for any other employer, performs “core” functions of the business as opposed to ones that are typically outsourced, or does essentially the same work as other people who are treated as employees.
Misclassification can be an even bigger issue if a worker is injured on the job.
For example, a teenage worker on a horse farm in Maryland recently suffered severe hand injuries when a horse kicked her. The teenager had been classified as a contractor, and earned $8 an hour for cleaning stalls and training and feeding horses.
After the injury, she wasn’t able to collect workers’ compensation because she wasn’t an employee. So she sued the farm for “fraud” stemming from the misclassification, as well as for not providing a safe workplace.
A jury found that she should have been treated as an employee, and awarded her $275,000. That’s a lot more than it would have cost the company to treat her as an employee and pay for workers’ comp insurance.