Misclassification of Employees in Kansas City

Workers can access many benefits by working such as health insurance, paid leave, and retirement. However, workers must meet certain requirements before their benefits begin. A major indicator of what benefits an employee can access is their classification. Employee classification is essential for workers pursuing a good compensation package, and misclassification robs them of that. If your employer is denying your benefits due to willful misclassification, speak to a Kansas City employment lawyer about reclaiming the compensation you deserve.

What Is Employee Misclassification in Kansas City?

According to the Kansas Department of Labor, misclassification of workers occurs when an employer incorrectly classifies workers as independent contractors rather than employees. Some employers do this to save money for their company by not making necessary withholdings or tax payments, which can have many consequences for them and their workers. Misclassification of employees typically means that employers aren’t paying the following:

• • • • Withholding tax
      • Social Security
      • Unemployment tax
      • Workers’ compensation

  Intentional worker misclassification is illegal and a form of tax and insurance evasion. The Kansas Department of Labor and the Kansas Department of Revenue may impose hefty penalties and fines on employers who engage in this activity. Employers can commit employee misclassification in numerous ways:

  • • • Employers refer to employees as independent contractors even though they are not self-employed.
      • Employers force employees to form a limited liability corporation or franchise company-of-one as a condition of employment.
      • Employers do not use any form of payroll but instead, pay the employees off the books.

  These misclassifications are not only legally irresponsible of the employer, but they can be detrimental to employees as well. 

  Consequences of Misclassifying Employees in Kansas City

  In an increasing number of industries, employers are misclassifying their employees as independent contractors, which can have long-term costs for an employer. Employees can qualify for various benefits, including health insurance and workers’ compensation, while independent contractors would not. Employers profit from misclassification, but it negatively affects workers and costs the federal and state governments tax revenue. For workers, consequences include:

  • • • Lack of the protection of workplace laws
      • Lack of access to unemployment insurance and workers’ compensation funds

  By committing misclassification, employers are potentially liable for unpaid taxes such as:

  • • • Social Security
      • Income tax withholding
      • State unemployment taxes
      • Workers’ comp insurance

  Leaving these taxes unpaid could put employers in hot water, and they may face penalties. According to the Fair Labor Standards Act, the Department of Labor can go back two years to recoup unpaid taxes and interest if the misclassification was unintentional. The DOL can go back three years if the misclassification was willful.

  What Is the Difference between an Employee and an Independent Contractor in Kansas City?

  The Internal Revenue Service (IRS) initially developed a 20-factor common law test to determine an employee’s status. However, it now examines the degree of control and independence present in the working relationship to classify workers. The IRS auditors analyze three categories of factors to classify workers:

  • • • Behavioral: Does the company control what the worker does and how they do it?
      • Financial: Are the business aspects of the worker’s job controlled by the party paying them, including how they are paid, whether expenses are reimbursed, and who provides supplies?
      • Type of Relationship: Are there contracts or employee-type benefits like a pension plan, insurance, and vacation pay? Will the relationship continue, and is the work performed a key aspect of the business?

  In addition to these factors, to deter worker misclassification, the Kansas Department of Labor outlines who is considered an employee versus an independent contractor.

  Who Is an Employee?

  In short, employees are longer-term, on the company’s payroll, and not hired for a single specific project. Under Kansas state law, an employee is anyone who performs services for an employer who controls what the worker does and how they do it, even if the employee has freedom of action. A significant aspect of an employee’s role is that their employer has the right to determine how the services are performed.

  Who Is an Independent Contractor?

  Independent contractors are not employed by the company that contracts them. They have their own trade, business, or profession and provide their services to the public. However, an independent contractor’s legal standing depends on the facts of their specific case. Generally, an individual is an independent contractor if the employer only controls or directs the result of the work rather than the means and methods of accomplishing the result, according to Kansas state law.