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Employment Classification and Rights
Introduction
Understanding employment rights can feel overwhelming and confusing. This section provides essential information on worker classification and misclassification as a first step in determining which rights apply to IT workers in various situations.
Workers have the right to work in an environment free from discrimination based on race, color, religion, sex (including pregnancy, sexual orientation, and/or gender identity), national origin, age (40 or older), disability, and/or genetic information. Employers cannot legally make decisions about hiring, firing, promotions, or other terms and conditions of employment based on these protected characteristics.
The resources linked at the end of the section provide more details to determine how a job should be classified. For example, a worker who receives a W-2 tax document will have different benefits than one receiving a 1099 tax document. This section explores how a worker can determine if their role is correctly classified and what steps to take if a worker has been misclassified.
Misclassification: Employees as Independent Contractors
Workers may be considered “employees” under laws that apply to work, or they may be “independent contractors”—this is considered a worker’s employment status or classification. Employment status is not a matter of choice or preference of the worker or employer but is based on factors like how much independence a worker has to do their work.
Misclassification of employees as independent contractors means that a worker is treated as an independent contractor when, under law, they should be treated as an employee.
Misclassification is a significant issue that can have serious consequences for both workers and employers. Typically, only workers who are employees have access to important benefits and protections under certain federal, state, and local laws, including:
- The right to minimum wage and overtime pay
- The right to job-protected family and medical leave
- Certain anti-discrimination and anti-retaliation protections
- The availability of workers’ compensation if injured on the job
- The availability of unemployment insurance
- The right to form and join a union
Workers who are misclassified by their employers are left essentially to bear the full costs and risks of being an independent business, despite lacking meaningful control over their work. The opportunity to clarify a position’s classification is most often during the job interview and negotiation process.
Myth Busting
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Myth
IT workers can be properly classified as independent contractors based only on if they work remotely.
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Fact
This is a myth. The location where an IT worker performs their duties is not the determining factor in whether they should be classified as an employee (W-2) or independent contractor (1099).
Even if an IT professional works remotely from home or another off-site location, they may still be considered an employee under the law if the employer exerts significant supervisory and financial control over their work.
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Fact
While not an exhaustive list, some key factors that could indicate an IT worker is misclassified as an independent contractor when they should be an employee include:
✔️ The company provides equipment, supplies, and training for the worker
✔️ The worker has set hours and a manager who oversees their work
✔️ The company, not the worker, sets the worker’s pay rate
✔️ The worker's duties are a key part of the company's business operationsWhile remote work arrangements are common in IT, that alone does not automatically make an IT professional an independent contractor exempt from employment laws.
Example
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John works as a software developer for ABC Tech Company. He signed a contract as an independent contractor, which should allow him to set his own hours and work from home. This means that he would receive a 1099 tax form and is not classified or treated as an employee of ABC Tech Company.
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However, in practice, his work arrangement more closely resembles that of an employee.
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1. The company requires John to attend daily meetings at specific times and work during set hours and provides him with a company laptop, software, and other tools necessary for his work.
2. John works exclusively for ABC Tech Company and is not allowed to take on other clients.
3. The company closely supervises John’s work and provides regular performance evaluations.
4. John’s contract with ABC Tech Company is open-ended, with no specific end date. -
Although John is classified as an independent contractor, the level of control exercised by ABC Tech Company over his work suggests that he should be classified as an employee. Depending on John’s preferences, he may approach his employer to discuss becoming an employee of ABC Tech Company and thus receive a W-2 tax document rather than a 1099. Or he might consult with a government agency.
Resources
U.S. Department of Labor (DOL)
The US Department of Labor (DOL) fosters and promotes the welfare of the job seekers, wage earners, and retirees of the United States by improving their working conditions, advancing their opportunities for training and profitable employment, protecting their retirement and health care benefits, helping employers find workers, strengthening free collective bargaining, and tracking changes in employment, prices, and other national economic measurements and administers a variety of Federal labor laws to carry out this mission.
- Wage and Hour Division: Information on misclassification
- Fact Sheet 13:Employee or Independent Contractor Classification Under the Fair Labor Standards Act (FLSA)
Department for Professional Employees, AFL-CIO
The Department for Professional Employees (DPE), AFL-CIO is a coalition of 24 national unions representing over four million professional and technical employees in nearly all occupations and sectors, including teachers, physicians, engineers, computer scientists, psychologists, nurses, university professors, actors, technicians, and others in more than 200 professional occupations.
Resources for employees misclassified as independent contractors
IRS guidelines
The IRS measures the degree of control vs. independence to determine the status of a worker.
IRS guidelines for determining worker status
State Labor Agencies
State labor agencies perform a variety of functions to regulate and oversee labor-related matters within their state including enforcing labor laws, administering unemployment benefits, managing workforce development and overseeing workplace safety and health.
States may have additional or stricter criteria than DOL or the IRS. Find your state agency’s contact.
The AFL-CIO Working for America Institute (WAI) has served as the AFL-CIO national workforce intermediary for over 50 years. The WAI brings together unions, employers, joint labor-management partnerships, workforce intermediaries, the workforce system, and community organizations to develop high quality, worker-centered training and Registered Apprenticeship programs and high-quality, family-sustaining jobs.
This workforce product was funded by a grant awarded by the U.S. Department of Labor (DOL)’s Employment and Training Administration (ETA). The product was created by the recipient and does not necessarily reflect the official position of DOL/ETA. DOL/ETA makes no guarantees, warranties, or assurances of any kind, express or implied, with respect to such information, including any information on linked sites and including, but not limited to, accuracy of the information or its completeness, timeliness, usefulness, adequacy, continued availability, or ownership. This product is copyrighted by the institution that created it.