Why companies choose to incorrectly hire employees as contractors

Getting a new job can be a great boon to your financial security and overall stability. The average employment situation can bring with it not only income but also benefits and paid time off. Unfortunately, more employers seem to want to limit how many of their workers are actually employees these days.

Quite a few businesses will hire employees but require them to fill out tax paperwork that names them as contractors. Initially, it may not seem like a big deal to work for a company that wants you to be a contractor but not an employee.

In theory, you have more control over what projects you do and what time you want to work. Unfortunately, when employers intentionally misclassify employees as contractors, workers don't receive any of the benefits of being an independent contractor but have to cover all of the costs.

Companies don't pay taxes on independent contractors

When an employer hires a new staff member, that individual represents a substantial investment. Not only do they have to cover the hourly wage or salary of that worker as well as the benefits, but the company will have to pay tax on the labor the worker does and provide workers' compensation coverage.

Employment taxes get paid by employers, some of whom like to pretend they do it as a favor to their staff and not out of legal obligation. By forcing staff members to fill out contractor paperwork, employers effectively sidestep their legal obligation to pay taxes or obtain insurance for employees. That burden then falls to the contractor, who faces a steeper tax rate than other workers because they must cover all of those expenses on their own.

A company can get rid of contractors with minimal consequence

If the business decides to downsize or just wants to hire cheaper replacements for its existing staff, doing so can lead to allegations of wrongful termination or discrimination. When their workers are all contractors instead of employees, the staff loses their right to any sort of recourse for wrongful termination.

Working as a contractor is seen as an at-will arrangement in which either party can immediately and permanently sever ties without financial or legal obligations that often come with employment. Many of the companies that engage in these shady practices will use contractors to perform work that is part of their daily operations.

Typically, if the work you do is critical to the overall function of the company, if your boss tells you when to work or how to perform a task or if you don't get to pick and choose the projects that you work on, you could be an employee who has been wrongfully misclassified as a contractor for the financial benefit of your employer.

If you believe this is the case in your situation, you may be able to take legal action in Tennessee against your current or former employer for the misclassification. Taking action can result in financial penalties for the company, which may be the only tactic that will successfully deter greedy businesses from intentionally misclassifying workers.

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