The Century Foundation reports that up to 2.1 million US construction workers are illegally misclassified. Misclassification lawsuits have become common in recent years as employees and regulatory agencies crack down on employers who incorrectly classify workers as independent contractors or exempt employees. When an employer misclassifies an employee, it can lead to a denial of benefits, unpaid wages, and lost taxes.
For employers, the potential damages in misclassification lawsuits can be severe, including back pay, penalties, and fines. It can cause damage to an employer’s reputation and lead to increased scrutiny from regulatory agencies.
This article will discuss how much you can sue an employer for misclassification and what the legal consequences are.
Overview of Misclassification Claims
A misclassified employee may be denied usual employee benefits such as health insurance, retirement programs, or unemployment benefits.
Misclassification can jeopardize your rights concerning minimum wage and overtime pay. You may be required to present supporting evidence like work schedules, communication with the company, or information regarding your job duties to advocate for your rights as an employee.
Understanding the distinctions between independent contractors and employees will allow you to make an informed decision and take action to protect yourself from being taken advantage of.
Types of Damages in Misclassification Lawsuits
Workers who have been misclassified as independent contractors may seek different types of damages in order to recover lost benefits and compensation. They can claim back pay, which is money they would have been paid as employees.
You could bring a claim for damages related to lost benefits, including health care benefits, retirement contributions, or paid leave. You could even seek damages for emotional distress caused by the misclassification.
In cases of particularly outrageous conduct by the employer, punitive damages could apply. You may request for your legal costs, such as attorney’s fees, to be covered as you pursue the case.
Impact of Unpaid Wages and Overtime
Misclassification frequently results in the worker losing legitimate overtime pay, causing significant financial stress.
Misclassification might result in a pay gap between you and that of properly classified colleagues.
The denial of overtime pay affects future earnings and savings. Awareness of these losses empowers you to seek legal action to recover payment for your past work.
Consequences of Lost Benefits and Protections
If you are classified as an independent contractor, you are not eligible for an employer-provided health insurance plan, which can cause financial hardship during medical emergencies.
Another consequence of being incorrectly classified is the loss of retirement contributions, which will have an impact on your retirement life.
You will not earn paid sick leave or vacation time, so you might have to decide between your health and your income. The absence of unemployment benefits makes transitioning between jobs difficult.
Workers compensation is an important type of insurance that reduces the financial risks of employees following a workplace injury. Independent contractors may not be covered by this insurance depending on the state.
Legal Fees and Penalties for Employers
Misclassifying employees can expose employers to huge fines from the regulatory agency. These fines can accumulate quickly, especially when back pay for unpaid wages and benefits is factored in.
Once it leads to a lawsuit, defending oneself will require a lot of time, energy, and money. In some cases, the losing party may have to pay the winning side’s attorneys’ expenses.
Classification processes should be reviewed regularly to ensure compliance with labor regulations and reduce misclassification claims. Correctly classifying workers protects your business and reduces financial stress.