Recourse for Employees Misclassified as Independent Contractors

2016 Fact Sheet

Misclassification as an independent contractor has several consequences that affect governments and workers. Employers who misclassify employees are failing to provide unemployment insurance (UI) and workers’ compensation (WC) as well as failing to pay employer withholding taxes—leaving workers with large tax bills.

Employees who believe they have been misclassified as independent contractors have several avenues for resolution. These suggestions are not intended to substitute for legal advice, nor are they intended to be an exhaustive list of available options or remedies.

First, workers can contact their state departments of revenue and labor to report suspected misclassification, including UI, WC, and tax fraud. Many states give workers the option of anonymously reporting employers who are erroneously misclassifying employees as independent contractors. Click here for a complete list of state resources for UI, WC, and tax fraud reporting.

Second, if the employer has misclassified the worker as an independent contractor and paid less than minimum wage or failed to pay overtime, then the worker can contact the U.S. Department of Labor Wage and Hour Division to report minimum wage and overtime pay violations.

Third, workers can anonymously report suspected tax fraud (employer failure to withhold taxes) to the Internal Revenue Service (IRS) by using Form 3949-A.  Workers can also file Form SS-8 with the IRS for a determination of worker status.  Form SS-8 CANNOT be filed anonymously.

Finally, workers always have the option of seeking legal counsel.

August 2016