Contractor or employee? Battle over status of gig workers continues
The Gig Economy is a term that refers to an array of jobs that are available for workers to either supplement their income or put their entire focus. These jobs, which include most notably positions with Uber and Lyft, are lucrative due to the control the worker has over his or her schedule. These types of jobs are also part of a heated legal dispute.
What is the legal dispute?
The dispute involves worker classification. Workers are generally classified within one of two categories: employee or contractor. There are different rules that an employer must abide by based on the classification and failure to properly classify a worker can come with serious consequences.
The dispute is one that is constantly evolving. Just last year, lawmakers passed a law that provided strict guidelines and essentially resulted in most gig workers qualifying as employees. However, a ballot measure recently passed which basically pulls back these changes, leading, yet again, to the classification of many gig workers as contractors.
What is the difference between an employee and a contractor?
The Internal Revenue Service (IRS) notes that some of the key differences between an employee and a contractor include:
- Control: The amount of freedom an employer gives a worker to do the job helps indicate whether a worker is an employer or a contractor. If the employer expects the worker to report hours within a given time period and conduct work within certain guidelines bodies like the IRS would likely categorize these workers as employees. Those who get to set these restrictions themselves are more likely contractors.
- Payment: Those who receive a regular paycheck from their employer are more likely employees. Workers who receive payment after completion of a job are often contractors.
- Contracts: The language of the contract with the employer can also provide some guidance.
Other indicators to help determine the right classification can include an extensive training period as well as the presence of benefits like health insurance, retirement plans and sick leave. The presence of these factors often serves as evidence of an employer/employee relationship.
Why does classification matter?
There are a number of reasons. For starters, classification impacts taxation. The IRS expects employers to withhold income taxes from employees’ wages. The agency also expects the employer to pay Social Security, unemployment and Medicare wages one an employee’s behalf. In contrast, when it comes to contractors, the IRS expects workers to pay these taxes on their own through the self-employment tax.
How do I know if I am an employee or an independent contractor?
The list provided above on the differences between the two classifications can help, but the answer is not always clear. An attorney who specializes in this area of law can help and provide guidance if you believe you were wrongly classified by an employer.