How a New York Employment Lawyer Can Help with Independent Contractor Misclassification

It’s becoming increasingly common for New Yorkers to earn their living through self-directed, freelance, or contractual work. These arrangements can come with many benefits, including the freedom to set your own hours and pick and choose projects. 

But although this type of work is increasingly popular, many workers who earn their living this way don’t understand the full extent of their rights or their employers’ legal obligations.

Many companies will hire workers as independent contractors, but then set performance expectations and work parameters that are much more in line with that of a full-time employee.

Employers often do this to avoid paying workers the benefits and level of compensation normally given to full employees.

Not only is cutting costs by intentionally misclassifying independent contractors illegal, it also deprives workers of the rightful protections and pay they deserve for this level of work.

In this guide, we’ll break down the legal difference between an independent contractor and an employee in New York.

We will also explain how employee misclassification can hurt workers, and outline how workers can get legal recovery for their illegal misclassification with the help of an employment attorney. 

If you have questions, please contact our New York employment attorneys online or call (866) 442-6755.

What Is The Difference Between An Independent Contractor And An Employee In New York?

Put simply, independent contractors are workers who are in business for themselves, serving clients or customers rather than a single company or employer.

Generally, independent contractors have more flexibility in their working conditions. They’ll often serve a variety of clients, set their own working hours, and are able to work under conditions relatively free of direct supervision from their clients.

Individuals working as independent contractors also may:

  • Have an established business
  • Advertise for clients in electronic or print media
  • Keep their own place of business
  • Provide services using their own equipment, tools, and supplies
  • Set or negotiate their own pay rate
  • Refuse work offers
  • Hire help or subcontractors
  • Work for more than one company at a time
  • Earn a profit or suffer a loss as a result of their work

Companies may hire independent contractors to perform work for their business — for instance, a bank might contract a janitorial service to have offices cleaned regularly.

But just because a janitor performs regular contractual work for the bank, that doesn’t necessarily make them an employee of the bank. 

Under either federal or New York law, there’s no single factor in a work relationship that definitively makes someone an employee.

Instead, courts have said that employee status is determined by considering a variety of factors in the employer–worker relationship. 

Ultimately, whether or not someone is an employee depends on how much supervision, direction, and control an employer has over their work.

The more control that an employer has over the circumstances of a worker’s day-to-day labor, the more likely that they’re in an employer–employee relationship, not an employer–independent contractor one.

Someone is likely an employee if their employer habitually does any number of the following things:

  • Chooses when, where, and how they perform their services
  • Provides facilities, equipment, tools, and supplies
  • Directly supervises the services
  • Sets the hours of work
  • Sets the rate of pay
  • Requires exclusive services (i.e. that you can’t work for competitors)
  • Requires attendance at meetings and/or training sessions
  • Asks for oral or written reports
  • Reserves the right to review and approve the work product
  • Requires prior permission for absences

How you’re paid can also be an indicator of employment status. Employees are usually paid by hourly rate or salary, while independent contractors are generally paid by the project, piece, or retainer.

Employees also often receive some funds for expenses in the course of business from their employers, such as allowances or reimbursement for travel or enterprise-related equipment purchases.

For independent contractors, though, any travel to meet with clients or to purchase equipment is a business expense they take on themselves.

Why Does Employee Misclassification Matter?

Importantly, employees are also eligible for certain benefits and protections under federal and state law — protections that are not extended to independent contractors.

Under the national Fair Labor Standards Act, employers are only required to provide individuals designated as employees with minimum wage and time-and-a-half for overtime.

Additionally, only full employees are eligible for unemployment insurance, workers compensation insurance, and retirement and health benefits. 

Although independent contractors have relatively greater autonomy to control their working conditions, they don’t have the protection of these basic rights extended to employees.

These protections include little regulation of worker safety and meal/rest periods, no guarantee of minimum wage, no overtime, and no insurance or employer tax payments. They’re also the ones responsible for paying the taxes on the income they do receive. 

Unfortunately, many employers take advantage of workers who aren’t aware of these designations or their rights.

In situations when the distinction between contractor and employee is not always clear, many employers purposefully misclassify workers as non-employees in order to save on the cost and liability involved in maintaining full employees. 

Misclassification can deprive workers of not only basic rights and protections but also a substantial amount of compensation from unpaid wages and overtime

How Do I Know If I’ve Been Misclassified As An Independent Contractor?

It’s important for workers to be aware: Legally, employment status is determined by the specific features of the working relationship — not the job title or what the employer calls the relationship.

Even if an employer has you sign a statement claiming to be an independent contractor or to waive any rights as an employee, you may still be legally considered an employee by law and a court, given the circumstances.

If you’re concerned that you’ve been misclassified, consider some of these questions:

  • Are the terms of your work (pay, deadlines, hours, etc.) negotiated between you and your employer? Or does your employer dictate them?
  • Is the work you do part of your employer’s overall business? Or does it involve separate skills and specialities brought in for temporary, contractual projects? 
  • Do you provide the tools and materials necessary to complete your work, or does your employer?
  • Are you permitted to subcontract any of your work for your employer, or do you have to do it all yourself?

Considering these questions and the amount of control that your employer has over the nature of your work can help shed light on whether or not you can legally be considered an employee.

But since there’s no single legal rule for separating independent contractors from employees, it’s always wise to consult with a legal expert who can more fully assess your situation.

What Can I Do If I’ve Been Misclassified By My Employer?

New York workers who suspect they’ve been improperly classified as independent contractors have a couple of options. 

First, try to gather as much documentation as you can that’s relevant to the work you’ve done for your employer. This includes any written agreements, employment contracts, invoices, timesheets etc. All of this information is evidence that a court will use to evaluate the kind of relationship you had with your employer.

Next, you can report your concerns to the New York state attorney general, who will investigate the matter as an issue of employment fraud in violation of state labor laws.

As part of its effort to address the unfair exploitation of workers, the state has put together a special enforcement task force aimed at identifying and penalizing companies that intentionally deprive workers of their rights and compensation through misclassification.

You can submit an anonymous report to the New York Department of Labor’s Employer Fraud Unit online, or by calling their 24-hour tip hotline (866-435-1499). 

Employees who’ve suffered independent contractor misclassification may also be able to receive financial compensation for an employer’s violation of their rights.

Contact an Employment Lawyer for Assistance

If a court finds that your employer improperly classified you as a contractor when you qualified for full employee status, you may be able to recover damages for the employee benefits you should have received. These benefits can include back pay for insufficient minimum wage, overtime, or missed meal/rest breaks.

If you suspect that you’ve been misclassified by your employer, whether intentionally or not, consult with an employment attorney as soon as you can.

An employment lawyer familiar with New York’s labor law can evaluate your situation, help you build a case against your employer, and advocate for you in court.

Ottinger Employment Lawyers has been helping workers win their rightful compensation since 1999. If you work in New York and are concerned about potential misclassification, contact our office today to talk to an attorney about your case.