What’s does it mean to be an independent contractor? Depending on who you ask there’s a good chance you’re going to get different answers. That’s because the definition of an independent contractor isn’t always concrete. Even experienced professionals in the transportation and logistics industry have some misconceptions about how different situations and laws apply to this classification of workers.
Here we debunk some of the most common myths about what it means to be an independent contractor:
Myth: My supervisor says I’m an independent contractor and not a regular employee. But it doesn’t make a difference if I get paid the same wage.
Reality: If someone is misclassified as an independent contractor, they aren’t eligible for many of the significant benefits employees receive. In most cases, individuals classified as employees are entitled to benefits and rights under federal, state, and local laws that independent contractors may not be eligible for including minimum wage and overtime pay, unpaid, job-protected family and medical leave, anti-discrimination and anti-retaliation protections, workers’ compensation if injured on the job, unemployment insurance, and employer payment of Social Security and Medicare taxes
Myth: Misclassification of independent contractors doesn’t impact my business.
Reality: Misclassification hurts law-abiding business owners because they can’t compete with employers who incorrectly and illegally classify their workers as independent contractors to cut labor costs. Additionally, federal and state governments lose billions of dollars annually in tax revenue due to misclassification.
Myth: If I’m classified as an independent contractor that means I’m not eligible for unemployment insurance.
Reality: Workers may still qualify for unemployment insurance even if they are classified as independent contractors. Each state has its own statutes, regulations, or policies they use to determine if an employer-employee relationship exists. Even if someone is classified as an independent contractor by a business, each state’s unemployment agency determines if that classification meets that definition under the law and whether a person is an employee and eligible for unemployment insurance. It’s also important to note that just because an individual is classified as an independent contractor it doesn’t prohibit them from filing for unemployment.
Myth: My employer sent me a 1099 tax form so that means I’m correctly classified as an independent contractor.
Reality: Receiving a 1099 does not make someone an independent contractor. If the scope of your work doesn’t fall within the law’s definition of an employee, you may be an independent contractor. If it does meet that definition, you are considered an employee.
Receiving a 1099 tax form is just an indication of how your employer classifies (or misclassifies) you for federal tax purposes. Also, getting a 1099 from an employer is irrelevant to determining if an individual is considered an employee under the Fair Labor Standards Act, Family and Medical Leave Act, or Migrant and Seasonal Agricultural Worker Protection Act.
Myth: If a person works as an independent contractor, they aren’t entitled to any of the benefits or protections available to people classified as employees.
Reality: This is where things get confusing from a legal standpoint because even if you are a legitimate independent contractor under one law, you can still be considered an employee under other laws.
The protections available under federal and state employment laws are generally available only to “employees,” and are generally not available to independent contractors. But Federal laws have different definitions of employment. Under the FLSA, MSPA, and FMLA most workers are employees, but the definitions in other laws may be more specific on who qualifies.
At DCN, we provide drivers and their equipment to the transportation industry. Rather than working as a single-person company or independent contractor, our membership enjoys benefits including marketing, insurance, settlement processing, and a voluntary benefits program. To learn more about becoming a DCN member, contact us today.