It’s no secret; employers sometimes misclassify employees as independent contractors. In some cases, employee misclassification is an honest mistake. But other times, employers intentionally misclassify employees to avoid paying taxes and providing employment benefits. Virginia Governor Ralph Northam recently signed several new bills that expand rights for misclassified employees. Here’s what you need to know about the new laws:
Why you should care about employee misclassification
Misclassification affects your rights. Generally, employees have more rights than independent contractors. For example, you have the right to sue your covered employer for illegal discrimination. Independent contractors don’t have this right when it comes to their clients and customers.
Similarly, independent contractors don’t have rights under the Fair Labor Standards Act (FLSA) or the Family and Medical Leave Act (FMLA). If you’re a non-exempt employee under the FLSA (meaning, the FLSA protects you), your employer must pay you time and a half for overtime. Independent contractors aren’t entitled to overtime pay unless the customer agrees in a contract. Say you can’t work for a month because you’re having surgery. If you’re an employee entitled to FMLA leave, your employer must hold your job open until you can come back from leave. But if you’re an independent contractor, your customer can hire someone else.
Additionally, employers are required to pay taxes towards Social Security, unemployment, and worker’s compensation, which benefit employees. Clients and customers don’t have to pay these taxes for independent contractors. Some employers intentionally misclassify employees in order to avoid paying employment taxes, providing benefits such as employee health insurance, and complying with other legal requirements.
What the current law says about misclassification
Through June 30, 2020, Virginia law doesn’t give you the right to sue your employer for misclassifying you. You can only take your employer to court for misclassification if you are a covered employee under the FLSA. In general, this means you are paid on an hourly basis and don’t perform executive, administrative, professional, computer, or outside sales duties.
How the new law protects employees
Beginning on July 1, 2020, you have the right to file a lawsuit in Virginia state court if your employer knowingly misclassifies you as an independent contractor. The deadline for filing is two years. Furthermore, the new law presumes that you are an employee (and not an independent contractor) if you provide services in exchange for compensation. In other words, it’s the employer’s responsibility to prove that you’re an independent contractor.
Governor Northam signed several other bills that penalize employers who misclassify employees. For example, under these new laws, the Tax Commissioner may punish employers that violate the law by requiring them to pay civil penalties and prohibiting them from contracting with the Commonwealth.
Another new law prohibits retaliation against employees and independent contractors who report or plan to report an employer for misclassification or who participate in an investigation, hearing, inquiry, or court action involving employee misclassification. Although the new law does not give you the right to sue your employer in court for retaliation, you may file a complaint with the Commission of Labor and Industry to get your job back and to recover lost wages.
What damages can I recover for employee misclassification?
If you prove that your employer knowingly misclassified you as an independent contractor, a court may award you:
- Lost wages
- Lost employment benefits, including expenses that your employer’s group insurance would have covered
- Other lost compensation
- Reasonable attorney fee
- Litigation costs
What if I’m misclassified as an independent contractor?
If you believe your employer misclassified you, it may be helpful to consult an experienced employment attorney. An attorney can determine whether you are an employee or an independent contractor under the law. A lawyer can advise you about claims you may have under Virginia’s current or new laws, as well as under federal laws like the FLSA.
If you have questions about your status as an employee or an independent contractor, Alan Lescht and Associates, P.C., can help. Our attorneys represent state and local government workers and private-sector employees in Virginia. We handle employment cases involving contract disputes, wages, overtime, commissions, misclassification, and other workplace issues.