Employment is in a constant state of flux. Everything from the safety regulations that apply to a job to the expectations of employees will shift over time. As the laws changes, how businesses operate changes, too.
In recent years, there has been a trend of businesses largely working with a staff of independent contractors instead of employees. Independent contractors are people running their own small businesses, but often they are employees subject to strict controls and micromanagement from the company that employs them.
Receiving an offer for full-time work as an independent contractor may seem like a great opportunity, but it does come with certain consequences for the employees involved. What happens when a business that employs you misclassifies you as a self-employed independent contractor rather than a standard employee?
You will have to handle your own taxes
As an independent contractor, you cannot expect the company paying you to withhold taxes on your behalf. Instead, you will have to retain money from each paycheck so that you can pay your tax bill when it comes due.
Not only will you have to handle your own estimated income tax payments, but you will typically have to pay more in taxes to make up for what your employer would have contributed if you were an employee.
You lose workers’ compensation benefits
Workers’ compensation is a way for employers to protect themselves from liability and their employees from any practical consequences stemming from a job injury or work-acquired illness. Your employer can avoid paying for coverage for you if they classify you as an independent contractor. That means that if you get hurt, you won’t necessarily receive medical benefits or disability coverage.
You won’t have unemployment benefits available either
Your employer should pay into the California unemployment system on your behalf to protect you in case they can no longer pay your wages in the future. Unfortunately, independent contractors do not have that same protection, which means that if the company goes out of business or lays you off, you don’t have any right to claim unemployment benefits.
Recognizing when a company may have violated your employment rights can help you stand up for yourself.