Am I an Employee or an Independent Contractor in New York, NY?

Whether a company in the Borough of Manhattan issues IRS Form W-2 or IRS Form 1099 to a worker at the end of the year likely signifies whether the company has classified the worker as an employee or as an independent contractor. (This article also refers to independent contractors as “freelancers” and “freelance workers.”)

However, the business’ employment classification of the worker may well be wrong. New York courts give no deference to a company’s employment classification of its workers.

In some industries, companies commonly misclassify workers as independent contractors. That a business’s competitors are misclassifying workers as freelancers rather than as employees is no defense for a business against a worker’s wage-and-hour lawsuit.

If you are indeed an employee of the company in Manhattan that retains you, then the company must classify you as an employee, even if that industry commonly misclassifies employees as independent contractors. Misery loves company is not a principle of employment law.

In New York, NY, employees enjoy legal rights that are far greater than the legal rights that independent contractors have. As a result of the sharp differences between the rights of employees and the rights of independent contractors, the New York legal standards that are used to determine whether an individual is engaged in work as an employee or an independent contractor is of great importance to workers in the Empire State.

To determine whether an employment relationship exists in the Borough of Manhattan for purposes of overtime pay and the minimum wage, courts use the economic reality test to ascertain whether the worker depends on someone else’s business for the opportunity to render service or, are in business for themselves. In the former case, the worker is an employee; in the latter, an independent contractor.

In applying the economic reality test to determine whether an employment relationship exists in New York City for overtime and minimum wage purposes, the court mainly considers five factors:

1. The measure of control exercised by the employer over the worker. A high degree of control weighs in favor of finding the worker to be an employee.
2. The worker’s opportunity for profit or loss and their investment in the business. That the worker can lose money (by purchasing equipment or incurring other expenses for which the company does not reimburse them) weighs in favor of finding the worker to be an independent contractor. Likewise, independent contractors are more likely than employees to invest substantially in equipment that they use in working for someone else.
3. The degree of skill and independent initiative required to do the work. That the worker is skilled or exercises business-like initiative weighs in favor of independent contractor status.
4. The permanence or length of the working relationship. A long-term working relationship weighs in favor of employee status.
5. The extent to which the work is an integral part of the employer’s business. That the worker’s labor is integral to the employer’s business weighs in favor of employee status. For instance, suppose a law firm retains a plumber to repair pipe in the firm’s offices. Since plumbing is not an integral part of the law firm’s business, the plumber is likely an independent contractor.

If you are an executive or a professional in New York, NY and you believe that you may have been misclassified as an independent contractor, or you believe you’ve been denied a salary, bonuses, commissions, overtime pay, or other wages owed to you, contact a qualified unpaid wages lawyer like attorney David S. Rich at (347) 941-0760 today.

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