Workers in California and around the country are protected against discrimination and harassment by federal laws like Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act, but those who work as independent contractors or for temp agencies are not covered by such statutes. This is a serious issue because the American workplace is evolving and most of the people who work in what is known as the gig economy are considered independent contractors.
According to the Bureau of Labor Statistics, 21 million Americans consider themselves to be independent contractors of one sort or another. This represents about 14 percent of the nation’s workforce. However, experts say that this figure is far too low and point to studies that put the true number of independent contractors at about 44 million. This is an area of the economy that is monitored closely by the Internal Revenue Service as companies sometimes misclassify employees as independent contractors so that they do not have to pay payroll taxes or provide benefits.
When determining whether or not a worker is an employee or independent contractor, agencies like the IRS tend to focus on how much control companies exert over their workers. They also take how workers are paid into consideration. Employees are generally paid an hourly or weekly wage whereas independent contractors are often paid in a lump sum once the project they are working on has been completed.
The penalties for classifying employees as independent contractors can be severe. In addition to demanding payment of back-payroll taxes, the IRS may assess fines and other sanctions when companies violate the rules. When representing workers who may have been misclassified in this way, attorneys with experience in this area may encourage companies to settle employment discrimination disputes discretely to avoid further scrutiny.