This sounds very suspicious and you are right to question your classification (employee or independent contractor). The main issue in determining who is an employee and who is an independent contractor is who controls your work. The general rule is that a person is an independent contractor if the employer has the right to control or direct the RESULTS of the work but not HOW the work is done or even WHAT work is done.
Many employers misclassify workers as independent contractors and pay them as "1099 employees" when in fact they should be classified and paid as regular W-2 employees. Employers receive a substantial benefit from doing this, but there is NO benefit to the workers. If you are wrongly classified as an independent contractor instead of an employee, you will not be eligible for many benefits of employment or your eligibility will be reduced. Areas affected include the right to:
– be paid for all hours worked or controlled by the employer;
– the legal minimum wage;
– overtime pay;
– rest and meal breaks;
– workers' compensation insurance;
– Social Security contributions;
– unemployment benefits;
– state disability benefits;
– employer benefits such as vacation, sick leave, pension, medical insurance, etc.
Also, in some states, including California, employers are subject to a penalty if they misclassify employees as independent contractors (see below).
There are different ways to determine if a worker is an employee or independent contractor. Employers must comply with all relevant laws.
FEDERAL TAX LAW: The Internal Revenue Service (IRS) looks at three areas to determine a worker’s status:
Behavioral Control: This area considers instructions and training. If the employer has the right to direct or control your work, even if it does not exercise that right, you are an employee. Therefore, if your employer gives you detailed or extensive instructions on how to get the job done, you are probably an employee and not an independent contractor. These instructions might include when to do the work, or how and where to do it; what equipment or tools to use; who you can hire or not hire to help you; what supplies and services to buy, and/or where to buy them. If the employer trains you in required methods of doing the work or the procedures to get the work done, this is evidence the employer wants things done its way, which indicates you are an employee and not an independent contractor.
Financial Control: This area considers who has the right to direct and control the business, not just the work. The more of a financial or promotional investment you have made in the work, the more likely you are an independent contractor. However, there is no requirement for an investment in order to meet the definition of independent contractor. If you incur expenses in performing the work but are not completely reimbursed, you are more likely to be an independent contractor rather than an employee, especially if these expenses are high. If you have the chance to make a profit or loss on the work, you are probably in business for yourself and therefore an independent contractor.
Relationship of the Parties: If you do not receive benefits such as medical coverage, vacation, or pension, you may be an employee or an independent contractor. However, if you receive benefits, you are probably an employee.
(continued in Comment below)
twitter.com/MikaSpencer *** All legal actions have time limits, called statutes of limitation. If you miss the deadline for filing your claim, you will lose the opportunity to pursue your case. Please consult with an experienced employment attorney as soon as possible to better preserve your rights. *** Marilynn Mika Spencer provides information on Avvo as a service to the public, primarily when general information may be of assistance. Avvo is not an appropriate forum for an in-depth response or a detailed analysis. These comments are for information only and should not be considered legal advice. Legal advice must pertain to specific, detailed facts. No attorney-client relationship is created based on this information exchange. *** Marilynn Mika Spencer is licensed to practice law before all state and federal courts in California, and can appear before administrative agencies throughout the country. She is eligible to represent clients in other states on a pro hac vice basis. ***
Ms. Spencer has given you an excellent answer. It is illegal to terminate someone for questioning whether they should in fact be a W2 employee, so long as the questioning is reasonable. You don't even have to be right about it; you just have to be reasonable in your belief that you have been misclassified. If you made such a reasonable complaint, you cannot legally be terminated for it.
This year, California enacted substantial penalties for companies that misclassify their employees as independent contractors.
I hope this information is helpful to you.
Craig T. Byrnes
Disclaimer: Please be aware that I am not offering legal advice, nor forming an attorney-client relationship with you. I am not representing you, nor doing anything to protect your legal rights. If you believe that you have suffered a legal wrong, take action before any statute or limitations expires, or your right to do so may be lost forever. Good luck in your legal matter.
Ms. Spencer has provided an outstanding response. I would just caution that simply because you raised the issue does not mean you have a claim. If the employer terminated your services because you would not come in on that one day, and not because you raised the employee issue, you would not have a claim for wrongful termination. However, whether or not you have a wrongful termination claim, you may well have other wages and penalties owed to you as a result of a misclassification.
Good luck to you.
This answer should not be construed to create any attorney-client relationship. Such a relationship can be formed only through the mutual execution of an attorney-client agreement. The answer given is based on the extremely limited facts provided and the proper course of action might change significantly with the introduction of other facts. All who read this answer should not rely on the answer to govern their conduct. Please seek the advice of competent counsel after disclosing all facts to that attorney. This answer is intended for California residents only. The answering party is only licensed to practice in the State of California.
Independent contractor Employment law for businesses Small business taxes Business insurance Business Employment Employment law and finances Workers' compensation Unemployment compensation Paying taxes on unemployment compensation Employee wages Employee wages and overtime pay Employee rights Employee protection laws Employee break laws and work hours Social security Termination of employment Wrongful termination of employment Employment as an independent contractor Tax law