Independent contractors are increasing in number every year. The changes that are going on in the workplace have facilitated this change. Employers often wrongly classify workers as independent contractors to avoid paying payroll taxes and other benefits. One of the most controversial things about this is paying for a worker’s overtime hours.
While true independent contractors are not eligible for overtime pay, many companies will misclassify workers as independent contractors instead of employees in an attempt to avoid paying overtime wages (as well as providing other benefits and protections).
The unpaid overtime attorneys at Bohrer Brady are here to help! Below we explain the factors that go into determining your overtime eligibility if you are classified as an independent contractor. For all overtime disputes and other wage & hour claims, contact our employment & labor attorneys today.
What is Overtime Pay?
A worker often has to work over 40 hours in a week to keep up with business processes. Overtime was introduced to protect workers who are required to work over 40 hours.
The Fair Labor Standards Act is the federal law that governs overtime pay, which established a rule that states if an employee works past 40 hours a week, they must be paid 1.5 times their hourly wages for every additional hour. If any company decides to breach these rules, it could face serious consequences.
What is an Independent Contractor?
An independent contractor is a self-employed individual or agency contracted to perform work for—or provide services to—another entity as a nonemployee. Unlike employees, independent contractors do not work regularly for an employer but work as required. If you’re classified as an independent contractor, you’re in charge of yourself, the services you offer, and your hourly rate. You can work on projects in any manner you like and use any tools you prefer as long as you deliver quality work before the stated deadline. However, this also means that you don’t have access to internalized employees’ benefits unless stated in the particular contract.
Independent contractors are not on the company’s W-2 payroll; therefore, they are not eligible for any form of compensation for overtime work. Consequently, they are not obligated to keep working after the eight-hour workday has passed.
Independent contractors are intended to be independent. Therefore, the more control the employer exerts over the worker, the more likely it is that the worker should be classified as an employee and entitled to the wide array of benefits afforded to employees.
What is a Contract Employee?
A contract employee is often mistaken to be an independent contractor; however, a contract employee is an official employee of the company. Contract employees work just like internalized employees, but a contract employee only gets the benefits clearly stated in their contract while an internalized employee gets all the benefits a company offers. Sometimes, a company will hire contractors to do the work of a full-fledged employee, but the company minimizes the capital involved in hiring an employee. However, contract employees are still considered to be employees.
Being an employee means that your employer has the right to control all your activities in the workplace. That includes how they want your work to be done. This is where a lot of cases of misclassification comes from. Contract employees can get paid overtime, depending on their classification within the company, because their W-2 employer of record has them on their payroll.
Why Companies May Misclassify Employees as Independent Contractors
With independent contractors, it is not about the wage and the hour but rather the project and the milestone completion. Due to this fact, many companies try to misclassify their employees as independent contractors. Some of the most common industries that misclassify employees include construction, real estate, home health care, trucking, janitorial, etc.
They do so for two main reasons:
- Avoid paying overtime compensation and save funds – Companies that misclassify their employees as independent contractors understand that most of the work they give out can’t be completed during regular work hours but they want to avoid being charged for overtime compensation. While businesses naturally want to do everything they can to save capital, that does not make it acceptable to deny employees the overtime compensation that is rightfully theirs.
- Avoid paying benefits and protection compensations – Most companies provide benefits such as health insurance, car insurance, and 401K to internalized employees. Giving these benefits to hundreds of employees can drain the finances of the company. By misclassifying employees as independent contractors, companies avoid paying for benefits for all staff.
Contact the Overtime Lawyers at Bohrer Brady
If you are an employee being denied overtime compensation, or you believe you are being misclassified as an independent contractor when you are in fact an employee, the overtime lawyers at Bohrer Brady can help you seek justice. We can evaluate your case, answer any questions you have about overtime pay or other wage and hour issues, and fight for the compensation you are legally owed.
We at Bohrer Brady have the knowledge, expertise, and experience to help resolve wage and hour claims, unpaid wages, employment law claims, and matters dealing with work off the clock across the U.S. Contact us today for a free consultation!