Does it matter if you are classified as an independent contractor as opposed to an employee? Yes it does because employees have many benefits denied to employees. These rights include: the ability to enforce civil discrimination laws (race gender national origin age and disability discrimination for example) the right to participate in retirement and health plans; the right to workers’ compensation benefits. It is not up to your employer to classify you as an independent contractor or an employee. Classification is determined by the type of work you are doing and the control of your employer. The New Mexico Taxation & Revenue Department has some simple guidelines which are stated below and come from their web site.
Independent Contractors vs Employees
Which one are you?
If you provide services for one or more businesses or organizations, you are considered either an employee or independent contractor. You cannot be both for purposes of a single transaction. In New Mexico, pay received by independent contractors is subject to gross receipts tax unless a statutory exemption or deduction applies to a transaction.
Employee wages are exempt from gross receipts tax. We accept the determination of the Internal Revenue Service regarding your status as an independent contractor or an employee. The IRS offers the following criteria as general guidelines.
You may be an employee if:
- income tax is withheld from your paycheck;
- you are covered by Worker’s Compensation;
- the business or organization that pays you also pays Social Security taxes and unemployment insurance for you;
- the business or organization considers you an employee, or
- the business or organization controls how a job is performed.
You may be an independent contractor if:
- you create your own schedule and hours;
- you are responsible for your own costs associated with the service provided. This includes the costs of your own vehicle, supplies or equipment;
- the business or organization gives you a Form 1099 rather than a Form W-2, or
- you have complete control over how you provide service to the business or organization that is paying you.
While these guidlines are meant for New Mexico residents (Las Cruces New Mexico and Southern New Mexico) they are really part of a larger body of law and guidelines that apply in Texas as well. Therefore if you think that you are being improperly classified as an independent contractor instead of an employee you should seek legal help. The United States Department of Labor also emforces misclassification of workers and more information can be found at their web site: http://www.dol.gov/whd/workers/misclassification/
I have many workers who have been told that they cannot sue for discrimination because they are not employees but are simply independent contractors. If the reality is that they have been mis-classified then they have the same right to sue for discrimination in the workplace. Always check with a qualified lawyer who specializes in employment law before you give up on protecting your rights to work in a discrimination free environment. In both El Paso, Texas and Las Cruces New Mexcio there are employers who attempt to mis-classify employees to try and get around the laws that protect employees from Discrimination, workers’ compensation Tax and Labor laws. You have rights to be protected as an employee if your employer attempts to mis-classify you.