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The perils of incorrect classification at work

Improperly classifying workers has become a significant problem in New York and around the country. In most cases, workers are given improper classifications to cut costs and reduce liability. Some court cases have dealt with this issue and have attempted to show that employers cannot expect to get away with classifying an employee as an independent contractor.

Two of the cases involve CSG Workforce Partners, Universal Contracting, LLC and Arizona Tract/Arizona CLA. As a condition of employment, they required that all workers must become owner/members of LLCs. Although they were doing the same type of work for the same companies, they were not given the same rights that employees would be entitled to. The companies benefited because they saved thousands of dollars in payroll taxes that would have been owed had the workers been classified as employees.

After an investigation in both Utah and Arizona, employees were awarded $600,000 in back wages while the employers were fined $100,000. When workers are classified as independent contractors as opposed to employees, they are not entitled to a minimum wage or safety standards on the job. They may also miss out on unemployment insurance or workers' compensation if they are laid off or hurt on the job.

A misclassification can result in a wage and hour violation. Such a violation may occur if a worker is improperly classified, which could result in that individual being improperly denied overtime or other protections. An attorney may use IRS criteria or other evidence to establish that a worker was under the control of an employer. If successful, a worker may be entitled to back pay and other damages after a formal trial or through informal negotiations.

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