Ways Misclassification Can Hurt Workers

In New Jersey, workers are classified as either employees or independent contractors. All employers in New Jersey are required to establish if the people working for them are employers or independent contractors. The classification of a worker as either an employee or an independent contractor is primarily determined by the ABC Test. In New Jersey, a worker is an employee unless an employer can show that the worker operates free from control, the work is outside the usual business or location of the employer, and the worker is engaged in an independently established business, trade, occupation, or profession. While most employers classify their workers correctly, some misclassify their workers. Worker misclassification occurs when an employer labels an employee as an independent contractor. Misclassification can have far-reaching negative effects on workers in the following ways.

Loss of Benefits

Employees receive several employment benefits that independent contractors are not eligible for. These include retirement plans, health insurance, and unemployment insurance. Classifying a worker as an independent contractor instead of an employee results in them losing access to these vital benefits. This can significantly affect their well-being. For instance, without employer-sponsored health insurance, an employee may have to bear the heavy burden of medical expenses.

Lack of Legal Protections

Employees, unlike independent contractors, are protected by numerous labor laws. These laws are in place to ensure employees are treated fairly in the workplace. These laws cover, among many other things, minimum wage, overtime pay, workplace safety, and discrimination. For example, the minimum wage in New Jersey is currently $15.13 per hour. This means that all employees must be paid at least $15.13/hour. As an employee misclassified as an independent contractor, these laws may not protect you. For example, as a misclassified worker, you might find yourself earning less than the minimum and working long hours without overtime pay. You may also not be covered under New Jersey’s workers’ compensation law.

Income Tax Contributions

There are certain payroll tax contributions employers make on their employees’ behalf. Employers also withhold a certain amount of money from workers’ paychecks to contribute toward income tax obligations. If a worker is classified as an independent contractor, they must cover these tax requirements on their own. Independent contractors must also pay other taxes, which employers typically share. This high tax burden can result in financial instability.

Weakened Collective Bargaining Power

Employers have the right to join together and form unions. Workers can negotiate for better wages, benefits, and working conditions through unions. Classifying a worker as an independent contractor instead of an employee takes away their right to unionize and collectively bargain for these things. When workers are misclassified, they are denied the power to advocate for themselves and improve their working conditions.

Psychological Impact

The stress associated with a lack of legal protections and financial instability can take a significant toll on a worker’s mental health. Misclassified workers may experience higher levels of anxiety and even depression.

Contact a New Jersey Employment Lawyer

If an employer has misclassified you, you have legal options. Contact our skilled New Jersey employment lawyer at the Trabosh Law Firm to learn about your legal options.

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