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Are You an Employee or an Independent Contractor [infographic]

Written by Ankin Law Office

Worker classification plays an important role in a workers’ compensation case. One of the greatest challenges facing the 21st-century economy is that of providing freelance employees, also referred to as independent contractors, the same rights, and privileges granted to those who do not work for themselves. With freelancers comprising between 5-30% of the workforce, it’s a problem the Labor Department has begun to tackle.

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employee or independent contractor infographic

In an effort to avoid paying workers’ compensation benefits, some employers incorrectly classify employees as independent contractors. Others are encouraged to sign on as independent contractors or “1099” workers. For those who have been injured while working as independent contractors, the laws surrounding workers compensation and the right to benefits are not always clear. Fortunately for workers injured on the job in Illinois, the court does not always agree with the classification that is designated by an employer.

How the Law Views Employee Classification

When a case is heard by the Illinois Workers Compensation Commission, several factors are considered to determine whether or not a worker is, indeed, an independent contractor. The level of control that an employer has over an employee is one key factor in making this determination. Additional factors include:

  • Scheduling and work hours
  • Work location
  • Nature of work and type of company
  • Tools and clothing (including uniforms) used on the job

Since Illinois courts consider more than how taxes are filed when making a final determination, even people classified as independent contractors might be eligible for workers’ compensation benefits.

Deliberate Misclassification of Workers

Companies such as Uber and Groupon often skirt workers’ compensation laws by classifying those who work for them as independent contractors. This helps them reduce costs and function with lower operating margins and higher profits. It also leaves those who work for them exposed to lawsuits as well as the inherent physical risks and associated expenses that can result from performing their job.

The Labor Department is aware of the problem and has responded with a 15-page clarification of the Fair Labor Standards Act. As legal challenges to companies like Uber arise, this clarification will no doubt be used by attorneys seeking to require Uber, Groupon, and others to reclassify employees so that they will be eligible for workers’ compensation, overtime, and other benefits granted to regular employees.

Furthermore, the Internal Revenue Service and Department of Labor are working together to tackle the problem of deliberate misclassification. Together, these federal entities are aiming to create a streamlined classification that will protect workers’ from predatory employment practices and usurious risk during the performance of their work. With freelance and independent contractors on course to comprise up to one-half of the future economy, it’s a vast segment of the population that these changes will impact. In 2014, the IRS conducted investigations that resulted in awarding nearly 110,000 workers in excess of $79 million in back wages.

Recent Lawsuits Could Help Define Worker Classifications

Recently, the ride-sharing program, Uber decided to settle two major class-action lawsuits filed in California and Massachusetts. These cases will help define how the company classifies drivers in the future.

The drivers in both lawsuits claimed that Uber had misclassified them as independent contractors, when they should have been employees, and that they did so to save money.

Under the terms of the settlement, Uber may continue to classify its drivers as independent contractors and will not be responsible for covering payroll taxes, workers’ unemployment insurance or workers’ compensation for their drivers. However, Uber will be paying out 100 million dollars to the drivers involved in the suit.

How these cases will impact Illinois Uber drivers is yet to be determined. Questions that a driver or similar worker may have regarding on-the-job injuries should be directed to a Chicago workers’ compensation attorney for clarification.

Categories: Infographics