How Do Missouri Laws Address Employee Misclassification, and Why Does It Matter?

How Are Employees Classified According to Missouri Law?

Proper classification of the people a business works with is crucial to ensuring that employment and labor laws are followed. There are two basic classifications for workers within Missouri: employee and independent contractor. Employees can then be further separated into hourly workers and salaried workers. An hourly worker is someone who is paid by the hour and must clock in and clock out to keep track of hours. Their paychecks may fluctuate based on the number of hours worked.

Salaried workers are paid a specific amount per year, which is divided by the number of times the company pays. The amount is generally the same no matter how many hours the employee works. Many salary positions do not qualify for overtime, and some salaried employees may be able to choose their hours as long as their duties are completed.

What Are Some Major Differences Between Independent Contractors and Employees?

Determining whether someone should be classified as an employee or an independent contractor isn’t necessarily easy. But the Internal Revenue Service lists 20 key factors for employers to look at when making these determinations. These include:

• Instructions: How much control the employer has over when and how the employee does business
• Training: Whether training is required for the role or the person already has the knowledge and skills
• Integration: How much the person’s services are integrated into the larger company’s business model
• Services rendered personally: Whether the person provides the services themselves
• Hiring assistants: Whether the person is able to hire and pay their own assistants
• Continuing relationship: Whether the person has an ongoing and continuing relationship with the employer outside of a specific job contract
• Set hours of work: Whether the person can make their own schedule or must report for certain hours
• Work done on premises: Whether the work is done at the place of an employment, a job site, or in the worker’s own space
• Order or sequence set: How much control the worker has over the method of work
• Reports: Whether regular reports must be submitted to the employer
• Payments: How the person is paid, such as hourly or by project
• Expenses: Who pays the worker’s expenses
• Tools and materials: Who provides the tools and materials necessary for the job
• Investment: How much the person is invested in performing the services
• Profit or loss: Whether the person is able to suffer a loss in the position
• More than one client: Whether the person is free to work with more than one company at a time
• Offers services to the general public: Whether the person is free to work with the public
• Right to fire and right to quit: Whether the person has the ability to be fired or quit instead of being held to a contract

What Are the Consequences for Misclassifying an Employee?

Employers face serious consequences for misclassifying employees. Because the category a worker falls into changes how they are paid and how taxes are withheld, a business could find themselves in trouble with the Internal Revenue Service. Suppose a company misclassifies someone as an independent contractor when they should really be classified as an employee. The company may owe back taxes, including those related to unemployment insurance, Medicare, and Social Security, because taxes aren’t withheld for independent contractors like they are for employees.

There may also be interest, penalties, and fees assessed.

Companies can also face fines for violating Missouri’s labor laws and have to pay substantial legal fees if the misclassification results in a lawsuit. In severe cases, misclassification of employees could result in a government audit and even criminal charges. Companies that consistently misclassify employees may also earn a negative reputation in their industry, which can impact their ability to hire and retain quality talent and client relationships.

How Can Being Misclassified Impact the Employee?

Being misclassified doesn’t just carry consequences for the employer. Benefits for employees are usually based off of these classifications. For example, perks like paid time off, health insurance, and retirement account contributions may only be available to full-time employees. If someone is misclassified as an independent contractor or part-time employee, this could mean they miss out on thousands of dollars of benefits.

Misclassification can also impact how much someone pays in taxes. Because employers don’t withhold payments for Social Security or Medicare, independent contractors are responsible for both the worker’s and the employer’s portion. This could mean that a misclassified employee could end up paying thousands of dollars in taxes that they don’t really need to.

If you are misclassified by your employer, you could also face intangible challenges, such as lack of opportunity for career advancement and a lack of job security.

What Should I Do If I Believe I’ve Been Misclassified by an Employer?

If you believe that you have been misclassified by an employer, the first step should be to talk with a Missouri employment law attorney. Labor laws can be confusing, and it’s not always easy to tell whether you should be classified as an independent contractor or employee or what type of employee category you fall into. An employment attorney has in-depth knowledge of the state and federal labor laws and can help you determine if there has been an error and what your legal options may be. This could include filing a lawsuit against the employer or filing a complaint with the Department of Labor.

Proper classification of employees ensures that the company is in compliance with Missouri’s employment laws. It also ensures that the employees are properly compensated and qualify for any other programs, such as workers’ compensation or unemployment.

At Riggan Law Firm, LLC, we help those who have been misclassified by employers seek compensation and ensure that they receive all the benefits and payments they are entitled to. If you have been misclassified by an employer or you believe that your employer isn’t following Missouri’s labor laws, call our office at 314-684-8406 to speak to an attorney.