Сlassifying Workers as Independent Contractors or Employees

Introduction 

Workers make up an integral part of the development and improvement of the world’s economic system today. These are the people who ensure the stability of the globe, by way of ensuring the stability of its economy. However, it should not go without mentioning that for these group of people to continue producing the best of what they do, there must be laws and regulations that govern their treatment by corporate institutions. Labor laws across the world require workers to be classified and as such, one would not be as misplaced to ask whether companies have the right to classify workers either as employees or independent contractors ( Dwd.wisconsin.gov , 2017). This concern is as important in the world of business today where many companies are mushrooming all over the world. Some of these might take advantage of the unemployment rates and use the situation to mistreat their workers by misclassifying them hence denying them of certain benefits. Misclassification or lack thereof may also be reason to companies facing avoidable penalties. 

Legal Governance 

Today, there is no specific law that directs employers to classify their workers. However, there are rules that govern the process of worker classification. However, under US law, employers are expected to pay their expected share and hold back that of their workers, the employment taxes for employees, but with the exclusion of independent contractors. As such, it is then important that companies do classify their workers as either employees or independent contractors to avoid facing penalties, imposed on them by the government. The national labor relations Act defines an employee as a person who is under the control of the employer in terms of their work process such as time of work, mode of wear and type of salary. An independent contactor on the other hand is described as a worker whose employer does not control the work process but rather its end product (Irs.gov, 2017). In today’s labor market, employers have chosen to use independent contractors more regularly for varying reasons that range from complying with employment taxes, reducing costs associated with salaries and benefits, and increasing workforce flexibility. 

However, ignorance at the company level could lead to lawsuits from workers and other legal companies for violation of classification regulations. It should be noted that the classification of workers as independent contractors may be detrimental to the interest of a company whilst being of benefit to the workers involved. Such a case involved Microsoft which was sued by freelancers it had hired on a contractual basis of more than two years. Even after signing a contractual agreement, the workers sued Microsoft of using them as employees since they worked the same hours under inspection. Microsoft was later forced to pay them $97 million as at December of 2000 (Muhl, 2002). If a worker happens to do copy writable work for a firm, the employer is expected to confirm the worker as an employee in order to obtain authorship of the work. If the worker in question happened to do the work on a contractual basis, then s/he may challenge the decision. 

As such, it is important that employers understand the legalities that determine whether a worker is an employee or an independent contractor. In the US, the courts have come up with three tests to compliment the regulations governing worker classification. These tests include; the common law test (the common appliances at the work place), the economic realities test (dependability of a worker on a certain business for employment) and the hybrid test (practice of both common-law and economic realities tests). While applying these tests, managers should know that they have been applied to different federal statutes and as such, what applies as an independent worker in a particular federal law may be an employee in a different federal law. For instance, if a worker is suspected of tax fraud, the IRS normally uses a derivation of the common-law test to assess whether said worker is an employee or an independent contractor (Irs.gov, 2017). This law has also been applied to national labor relations Act which oversees labor-management affairs as well as the joint bargaining for unionized members. In a case pitting Nationwide Mutual Insurance Co. v. Darden, the US Supreme Court concluded that in the case of federal laws that do not clearly state the definition of an employee, then the relationship between the worker and employer should be assessed and determined basing on the common-law test. This should be done with focus on who had control over the worker (Muhl, 2002). 

Intent 

The regulation for classification of workers, requires all companies to classify their workers as stated before. In order to avoid legal penalties following cases filed by workers in relation to constitutional Acts and ordinances like the national labor relations Act (NLRA), federal income tax law and many other related laws, so as to avoid unnecessary law suits. For instance, Title VII of the Civil Rights Act directs that in the case of a legal suite between a worker and employer, the court should use the economic realities test to determine the truth. This means that under Title VII, an employee can easily sue their employer in the case of such complaints (Workerclassification.com, 2017). The regulations concerning classification of workers are highlighted in simple language of law that can be understood by both employers and their workers. The direction to classify workers however is related to and associated with the repercussions that might ensue in case there is any failure in the whole process. This is done with the intention of safeguarding both employers and employees from any unnecessary harm ( Dwd.wisconsin.gov , 2017). Today laws are in place to protect the welfare of workers in their respective workplaces and it is under these laws that workers have been sued and forced to pay those that they have been accused of misclassifying. 

Moving Forward 

In as much as most of the employers across the world have taken in their stride the classification of workers, many more continue to recruit personnel without any regard of how or where to classify them. As such, the requirement to classify workers could be drafted into a legal requirement is valid and so should be encouraged and initiated across the world. Creating a constitutional law that directs all companies to classify their workers would be a step forward in enhancing sanity in the business world. As stated earlier, many companies today are taking advantage of workers and misclassifying them in so as to easily circumvent legal regulations like paying employment tax, paying benefits to workers and avoiding other costly expenses in terms of salaries. Also, the law should clearly set strict penalties for offenders of the said law. Other than the normal compensation given to victims, offenders should be made to pay hefty fines or even stripped of their certification or licenses. Such rules will encourage all employers to stick to the book and by so doing, will be protecting the workers. 

References 

Dwd.wisconsin.gov. (2017). Worker Classification - Is a Worker an Employee or an Independent Contractor? - Wisconsin Department of Workforce Development . Retrieved 12 July 2017, from https://dwd.wisconsin.gov/worker_classification/ 

Irs.gov. (2017). Independent Contractor (Self-Employed) or Employee? . Retrieved 12 July 2017, from https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee 

Muhl, C. (2002). What is an employee? The answer depends on the Federal law . www.bls.gov . Retrieved 12 July 2017, from https://www.bls.gov/opub/mlr/2002/01/art1full.pdf 

Workerclassification.com . (2017). Classification Tests . Retrieved 12 July 2017, from http://www.workerclassification.com/Classification-Tests