Misclassification

Employers often use all types of employment categories to help control operating costs. There is no question that labor expenses are one of the most fluid areas when it comes to managing the financial solvency of a company, as well as its cash flow. As a result, how employees are hired, classified and paid can make a big difference to the bottom line. One of the more common areas that employers often favor, especially when there is a high supply of capable workers available for a function, is to hire people on as independent contractors versus as direct employees. Another is to move a person into exempt status so that overtime is part of a salary versus hourly pay.

An independent contractor status has significant financial benefits for an employer. First, they avoid payroll taxes. Because the worker is technically a contractor, he or she becomes responsible for the full amount of income taxes earned. This is generally allowable where a project is limited in scope and ends by a certain date and involves specialized demands for help. Ergo, the need for a contractor to come in and assist. Unfortunately, many companies hire people under this label fully intending to use them as regular employees on an ongoing basis, avoiding tax costs and overtime charges in doing so.

Another twist in the employee category is the exempt status. An exempt employee is generally a salaried employee and often involves management or specialists. It is not a status intended for hourly wage work. The exempt status usually pays a higher wage in comparison, and the employee is then expected to perform as necessary, regardless of 40 hours a week limitations or similar. The hourly wage worker would automatically get overtime after a set number of hours in a work week in comparison. Obviously, with high work demands, the exempt status can end up being significantly cheaper for an employer. So, no surprise, some employers look to aggressively label their staff as salaried employees where possible.

The bottom line in the above is that the employee who is misclassified is being denied wages due to him or her for work performed. This is inappropriate and likely a violation of both state employment laws as well as federal tax laws.

For those finding themselves in employment situations where they need the help of Southern California misclassification attorneys, the Law Offices of Gregory A. Douglas should be contacted. Not only can options be discussed in an initial meeting to understand all the legal alternatives available, Gregory Douglas can point out where the strengths and weaknesses of a given case may be, and what needs to be in place to move ahead.

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