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Misclassifications in the workplace occur when a worker is improperly designated as an independent contractor when he or she should be an employee. Benefits, overtime pay, and other legal protections depend on which classification a worker belongs to. Because misclassifications can result in millions of lost tax dollars, the IRS has recently increased the number of business audits it performs in order to crack down on employers who try to escape tax liability by misclassifying their employees.
To reduce potential liability, employers should speak with an Atlanta employment lawyer to determine which classifications are appropriate for their workers. Failure to do so could leave the company vulnerable to lawsuits.Consequences of Misclassification
Misclassified employees may be deprived of benefits and protections to which they are legally entitled. These benefits include health care, family leave, overtime pay, medical leave, minimum wage protection, and unemployment protection.
Such misclassifications harm not only the employee, but also federal programs such as Medicare and Social Security. Because the misclassification problem has exploded in recent years, state and federal governments have decided to intervene. The Internal Revenue Service imposes hefty penalties on employers who inaccurately classify employees as independent contractors.Penalties for Misclassification
If an employer misclassifies a worker, the employer is responsible for paying any unpaid employment taxes, unless the employer has a reasonable basis for classifying the worker as an independent contractor.
Workers who have been misclassified may file either an individual or a collective action claim against the company. Disgruntled workers who have been fired may also file a misclassification-based lawsuit in retaliation.
An employer who has wrongly classified an employee as exempt could be required to compensate the employee for all back pay that is owed for overtime or minimum wage violations. The FLSA requires non-exempt employees to be paid 1.5 times their regularly hourly rate for overtime work. Overtime work refers to any time an employee works over the regular 40 hour work week. An employer who has failed to pay a worker their deserved overtime will be responsible for all back pay owed to the employee, plus punitive damages.Parks, Chesin & Walbert Can Help Prevent Lawsuits
Parks, Chesin & Walbert has helped numerous clients protect themselves from liability due to misclassification. Parks, Chesin & Walbert has a deep understanding of the FLSA and are available to answer any questions related to an employee's classification. Because we understand that this area of law can be confusing to both employers and employees, we make sure our clients fully understand their rights and obligations under the law. Although we do our best to help prevent lawsuits, we offer litigation support for the cases that make their way to court. Call us at 404-873-8048. Our clients trust us to provide straightforward and reliable legal representation that gets results.