Are You An Employee or Independent Contractor?

Many workers are misclassified as independent contractors when they should be classified as employees. This misclassification can result in workers being denied benefits and protections that they are entitled to under the law, such as workers' compensation, unemployment insurance, and minimum wage and overtime pay.

What is Employee Misclassification?

Worker classification is an issue that affects workers' compensation and the U.S. workforce. A 2022 Economic Policy Institute analysis of 11 commonly misclassified jobs estimates the cost of independent contractor status to these workers. For example, as an independent contractor, a typical construction worker would lose as much as $16,729 per year in income and job benefits compared to what they would have earned. As an independent contractor, a typical home health aide would lose as much as $9,529 per year in income and job benefits compared to what they would have earned. 

Occupations Most at Risk of Misclassification

·      Constructions Workers

·      Landscapers

·      Truck Drivers

·      Home Health Aides

·      Janitors and Cleaners

·      Nail Salon Workers

·      Nannies and Housekeepers

·      Retail Sales Workers

·      Customer Service Reps/Call Center Workers

According to the U.S. Department of Labor, there are three primary factors to consider when determining whether a worker is an employee or an independent contractor: the degree of control the employer has over the worker, the worker's opportunity for profit or loss, and the worker's investment in equipment or materials. If the worker is economically dependent on the employer, they are likely an employee and entitled to the protections and benefits of that status.

Employers misclassify workers as independent contractors to avoid paying taxes and providing benefits, which can lead to legal challenges and fines. In addition to the financial impact on workers, misclassification can have broader economic implications, such as reduced tax revenue and increased competition from businesses that do not comply with labor laws.

New Hampshire ABC TEST

In New Hampshire, whether a worker is, an employee or an independent contractor is based on the "ABC" test. Under this test, a worker is considered an employee unless all three of the following conditions are met:

A.    The worker is free from the control and direction of the employer in connection with the performance of the work, both under the contract and, in fact; and

B.    The worker performs work that is outside the usual course of the employer's business; and

C.     The worker is customarily engaged in an independently established trade, occupation, profession, or business of the exact nature of the employer's work.

Workers are considered independent contractors if they meet all three conditions. If not, they are considered employees and entitled to the protections and benefits of that status, such as workers' compensation, unemployment insurance, and minimum wage and overtime pay.

It is important to note that the ABC test is used only to determine worker classification under New Hampshire law. The IRS and other federal agencies may use different tests to determine worker classification for federal tax and benefits purposes.

It always pays to talk to an experienced attorney. Your case is much more likely to be successful if you work with an attorney you can trust.  Patch & FitzGerald has successfully represented clients and won complex cases for over 35 years.  Call us today at 603-647-2600 for a free consultation.  We only get paid when you do!