The Cost of Misclassifying Employees and Independent Contractors

Classifying workers correctly is an important part of running a business in Pennsylvania. A mistake can expose an employer to costly legal disputes. If your business has questions about worker classification or is facing a legal dispute, our Pennsylvania employment law lawyers at Mette Attorneys at Law can help you understand your obligations and reduce the risk of future liability.

Why Worker Classification Matters in Pennsylvania 

Pennsylvania employers often use both employees and independent contractors to meet business needs. Labeling someone as an independent contractor or having them sign an agreement does not determine their legal status. Instead, Pennsylvania and federal agencies examine the actual working relationship, including the amount of control the business has over how the work is performed.

Misclassifying workers as independent contractors when they should legally be treated as employees can have serious consequences for both businesses and workers. The distinction is important because employees are entitled to legal protections and benefits that independent contractors generally do not receive. 

Employers must keep accurate records for workers. These records may include work hours, job duties, and employment agreements. As outlined in 43 P.S. § 333.108, employers are required to keep payroll records for covered employees. These records help show whether workers received proper wages and overtime pay. Poor record keeping can make it harder for an employer to prove that a worker was properly classified. Employers should maintain clear documentation for all workers, including those treated as independent contractors.

The Financial Consequences of Misclassification

The costs of misclassification can quickly add up, especially if the issue affects multiple workers over an extended period. Employers may become financially and legally responsible for:

• Unpaid wages
• Unpaid overtime
• Back taxes, penalties, and interest
• Unemployment compensation assessments
• Workers’ compensation issues

In some situations, employers may also face claims for attorney’s fees and litigation costs. Even an unintentional mistake can create expensive legal problems that disrupt business operations.

Government Enforcement for Worker Misclassification

Pennsylvania employers may face government enforcement actions after a worker files a misclassification complaint. State agencies can investigate whether workers were properly classified. These investigations review employment records, payment methods, and the actual job responsibilities fulfilled by the worker.

Under 43 P.S. § 753(l)(2)(B), a worker may be considered an employee unless the employer can show that the worker is free from control and operates an independently established business. Employers that misclassify workers may become responsible for penalties.

A government investigation can also affect daily business operations. At Mette Attorneys at Law, our lawyers help employers identify potential classification issues before they become larger problems. We review contracts and business operations to provide practical guidance that complies with Pennsylvania and federal employment laws.

Protect Your Business With the Help of Our Pennsylvania Employment Law Attorneys

Misclassification claims can place significant financial and operational burdens on a business. Mette Attorneys at Law works with employers throughout Pennsylvania on all types of employment law disputes. Contact one of our employment law attorneys in Pennsylvania today online or by calling 717-928-8424.