Employers need to mitigate the risks of misclassification

On Behalf of | Apr 21, 2021 | Employer Liability Prevention |

There are a lot of reasons why an employer would want to classify someone who does work for them as an independent contractor. Some workers may also see the benefits of being an independent contractor.

For Pennsylvania employers, the benefits of using independent contractors are numerous.

In a nutshell, an employer does not have to pay for an independent contractor’s unemployment benefits or workers’ compensation benefits.

The employer also does not have to pay a share of certain federal and state taxes, like Social Security and Medicare, and also does not have to extend its employment benefits to independent contractors.

Finally, the employer does not have to pay an independent contractor overtime and minimum wage according either to the federal Fair Labor Standards Act or Pennsylvania’s law.

Misclassification of employees as independent contractors can mean penalties

On the other hand, courts and government regulators will not hesitate to impose penalties on employers who misclassify an employee as an independent contractor.

To put it simply, a worker does not become an independent contractor on the employer’s say-so. The nature of the worker’s job and other circumstances are what determine if a worker is an employee.

Misclassifying an employee means that an employer may have to pay back wages, benefits and overtime to the employee, possibly with interest. The also may have to pay additional compensation to the employee in the form of costs and attorney fees.

Under Pennsylvania law, the employer may also have to pay additional damages that can amount to 25% more than the wages the employer owes. Civil penalties can also be imposed by different federal and state bodies, and, in some cases, criminal charges are possible.

To use independent contractors properly, employers need a legal strategy

Using independent contractors brings a number of financial and other benefits to employers in Pittsburgh and Philadelphia.

However, employers need a comprehensive legal strategy to be sure that their practices and procedures leave no question that they have properly classified their workers. Otherwise, they could face time-consuming and expensive litigation.

An experienced employment law attorney can help a business develop their legal strategy.