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An Independent Contractor Agreement Does Not Make You Independent

Whether a worker is classified as an employee or an independent contractor makes a significant difference in an employer’s duties and obligations toward the worker. The distinction governs everything from the applicability of wage and overtime law to unemployment and workers’ compensation eligibility. All too often employers misclassify workers in an effort to reduce or eliminate expenses and benefits to which the worker should lawfully be entitled. Both employers and workers should be aware that the presence of an independent contractor agreement does not, alone, serve to classify a worker as an independent contractor.

A recent case out of Allegheny County, Watson v. Prestige Delivery Sys., 27 Pa. D & C, 5th 449 (2013) highlights the importance of properly classifying workers and the risk of relying on an independent contractor agreement to determine the proper classification. In Watson the Judge made a ruling at the summary judgment stage; however, that ruling proves how misclassifying employees can have detrimental impact that ripples through the company.

In Watson, two drivers brought a claim asserting that Prestige Delivery should have treated them as employees not as independent contractors. The drivers sought damages for unpaid wages as well as alleged that the company made unauthorized deductions in pay. The claim was brought by the drivers as a collective action on behalf of other similarly situated drivers. Despite the fact that the drivers signed independent contractor agreements, with the Judge's ruling this case will likely go to a jury trial the outcome of which could be quite an expensive judgment for the employer. The lawsuit alleges violations of the Pennsylvania Wage Payment and Collection Law as well as alleges fraudulent misrepresentation on the part of the defendant. The court specifically rules that the claims for fraudulent misrepresentation are viable at this point in the litigation which does not bode well for the employer.

In all likelihood the Company has based its entire business model on the assumption that it hires independent contractors not employees.  An adverse ruling in the current case could be devastating as the ruling will likely apply to all drivers employed by the company. If the Plaintiffs ultimately prevail in Watson, each incorrect paycheck handed out by the employer is a separate violation, collectively exposing the Company to a series of financially devastating awards that will be topped off with counsel fees.

Watson illustrates the why the time for an employer to test the proper classification of a worker is long before it is put into action. It also highlights the need for workers to question the independent contractor classification if it appears to have been made solely to avoid payment of wages or benefits on the part of the employer.

If you have concerns about the proper classification of a worker, contact an experienced Pennsylvania employment law attorney as soon as possible to discuss the situation before it becomes the subject of litigation. Contact the employment law attorneys at Curley & Rothman, LLC by calling 610-834-8819.