Employee Misclassified as Independent Contractor

by Joel Christiansen

Employers generally classify workers into one of two categories: (1) employees; and (2) independent contractors. Employees have significant legal rights that do not apply to independent contractors. However, many employers prefer to hire independent contractors because of the costs and obligations associated with being an employer.

There is no single rule or test to define whether a service provider is an independent contractor or employee. The applicable standard will depend on the context:

  • For Oregon wage and hour claims (overtime, minimum wage, paychecks, etc.), see the economic reality test
  • For Oregon civil right claims (discrimination, retaliation, harassment, leave, etc.), see the right to control test
  • For Oregon unemployment, taxes, and certain professional licensing matters, see ORS 670.600

Misclassification occurs when an employer incorrectly treats a worker as an independent contractor when he or she is really an employee under the applicable test. When an employer misclassifies employees, that employer exposes itself to liability for wage claims, civil rights claims, unemployment claims, and, ultimately, large tax assessments.