How Employee Misclassification Can Affect Work Comp Benefits

Misclassifying employees as contractors denies them workers’ comp. They bear injury costs and lose legal rights. Employers risk fines and legal battles.

With the challenging economic times, employers have resorted to hiring independent contractors to maintain profit margins. This trend has seen independent contractors in the country rise by almost double, climbing from 15.8 million in 2020 to 31.9 million in 2022. 

Unlike regular employees, independent contractors or freelancers don’t receive benefits. As such, employers don’t have to pay for workers’ compensation, overtime, paid leave, and other benefits. However, misclassifying employees as independent contractors can affect their workers’ comp benefits.

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What Is Required to Receive Workers’ Compensation Benefits?

A formal employer-employee relationship is the first requirement for workers’ comp benefits. Technically, anyone working under an employer is an employee, provided the employer can direct how the hired individual performs their service. However, since independent contractors sometimes work under employees’ directions, the following questions distinguish them from regular employees.

  • How is the employer/freelancer paid?
  • Who provided the material, equipment, and tools for the job?
  • Who had direction over when and how the tasks were completed?
  • What skills are necessary for the job?

Typically, independent contractors have control over how and when they do their job. They also source their own tools, materials, and equipment, and also have skills outside the ordinary employee cluster. They’re also liable for any profits and losses incurred while rendering their service.

Effects of Employee Misclassification on Workers’ Compensation Benefits

As mentioned, independent contractors aren’t liable to receive any benefits, including workers’ compensation. You can think of them as external entities hired only to provide their services. Employee misclassification can affect workers’ compensation in the following ways:

Workers’ Comp Ineligibility

Employees wrongly misclassified as freelancers are automatically disqualified from workers’ compensation coverage. As such, they might not receive coverage should they suffer a work-related injury or illness, meaning they’ll have to pay for any medical expenses and other costs out-of-pocket.

Loss of Legal Protection

Employment laws protect the rights and liberties of all employees. Independent contractors aren’t subject to these laws and thus forfeit these legal protections. This makes it hard for misclassified workers to pursue compensation after a work injury.

That said, it’s not uncommon for employers to misclassify their employees as freelancers accidentally and sometimes intentionally. Employee misclassifications can trigger potential legal battles with employees. Employers found guilty of employee classification are liable to tax violations and federal violation fines. They also risk damaging their reputation to customers and potential employees.

Wrongly Misclassified? Talk to Us Today

Silence about misclassification can cost you. If you’re facing challenges with your employment classification, reach out to The Law Office of James M. Hoffman to ensure your legal rights are protected after a work-related injury.

Get FREE Legal Advice

Call today to speak with an experienced Missouri workers compensation attorney!

Call (816) 399-3706
Updated: October 30, 2023

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