The independent contractor vs. employee misunderstanding is not an innocuous detail, costing injured workers thousands in lost income, out-of-pocket medical bills and denied benefits.
When you hear independent contractor vs. employee, the difference seems small. However, if you are injured on the job, the wrong class can mean losing Thousands of In wages, medical care, and legal protections.
What does “employee misclassification” mean?
Employee misunderstandings occur when an employer calls someone a “contractor” but treats them like an employee. This can leave workers without basic rights. Wrong-class workers may not have basic workers’ rights, such as:
- Minimum wage salary
- Overtime pay
- Security benefits from employment
- Worker’s Compensation
- Taxes also change: Instead of withholding, the worker pays self-employment taxes, which can be a huge burden.
For many construction workers, including immigrants working for general contractors or subcontractors, misunderstanding is not a technical skill. This is a dangerous trap. These workers often face unsafe conditions, and if they suffer, being labeled a “contractor” can prevent access to compensation.
How to know if you’ve been misclassified
To determine whether someone is actually an independent contractor or actually an employee, government agencies rely on a statutory “test.” Here are some worker classification rules and tests:
The IRS common law employee test
The IRS uses a multi-factor test that looks at:
- Behavioral control: Does the employer tell you how, when and where to work? Do they supervise, train and control your work?
- Financial control: Do you invest in your tools? Do you have a business risk? Do you decide which jobs to take?
- relationship: What does your written contract say? Do you receive a W-2 (employee) or a 1099 (contractor)? Is there a long term relationship?
These factors help the IRS decide if you have been misclassified so they can enforce tax obligations.
DOL Economic Reality Test
At the federal level, the US Department of Labor (DOL) uses an economic reality test. Under the 2024 final rule, DOL looks at the full picture of your employment relationship, not just what your contract says.
However, enforcement gets complicated: As of May 1, 2025, the Wage and Hour Division stopped using this new rule in investigations (per Fab 2025-1), although it is still important in private litigation.
New York: Fair Play Act
Under New York’s Construction Industry Fair Play Act “ABC test,” workers are considered employees unless the employer can demonstrate:
A. They are free from control in how they operate.
B. They perform functions outside the normal course of business of the hiring party. And
C. They are independently established as a trade or business.
This means that many subcontractors on construction sites are legally employed, not independent contractors, and employers who attempt to circumvent this presumption risk large fines.
Why the wrong class drains the wallets of injured workers
Misunderstanding of workers has a huge impact on their economy and safety. Many employers misclassify their workers to save money and have fewer responsibilities.
Workers’ Comp Eligibility in New York
Workers in New York must be covered by workers’ compensation insurance paid for by their employer. Wrong class workers cannot be covered.
If you’ve been injured on the job, being in the wrong class can delay or block your workers’ compensation coverage. Instead of covering your medical care and lost wages, you may end up fighting for basic benefits or eating up costs. For a serious injury, tens of thousands of dollars can pile up, and without comp, it’s all out of pocket.
No safety net, no use
As a 1099 “contractor,” you may not have access to unemployment insurance, employer-paid sick or health leave, or retirement contributions. Plus, you pay the full amount of self-employment tax, meaning more money lost from taxes and less cushion when things go wrong.
High risk industries
Some industries are particularly misunderstood: construction, trucking, cleaning, home health care, and more. For example, in construction, general contractors sometimes use intermediaries to transfer risk to subcontractors. But injured workers in these jobs often find out the hard way that their protections are lacking.
Legal liability for general contractors
In New York, Workers’ Compensation Law § 56 makes injured subcontractors legally liable to general contractors. Even if you are paid as a “contractor,” the general contractor may still be liable for your comp if you are reclassified as an employee.
Red flags: Are you called a “contractor” but treated like an employee?
If you suspect you may be incorrectly labeled a contractor, watch for these signs:
- You are told when to act and where to be. This means your boss controls your schedule.
- Your working tools and equipment are provided by your employer.
- Your pay is hourly or even weekly.
- You do not hire or fire helpers. You hire your boss along with other workers.
- You are working in a job that is central to the company’s business (eg, building, painting, demolition).
- You can’t choose your hours or the projects you do for your boss.
- Your contract or pay slip calls you a “contractor,” but in practice, you’re supervised and treated like a regular employee.
New York concerns: What the Fair Play Act means for the wrong class of construction workers
Here’s what the Fair Play Act means for construction workers in New York:
- Job Specs: Under the ABC test, the default is that site workers are employees, not independent contractors. Employers must Prove otherwise.
- Penalties for wrong class: Employers face serious fines and potential legal trouble if they persistently misclassify.
- Workers’ Comp Coverage: If you are legally employed, you are eligible for benefits including medical care, wage replacement, and disability, even if a 1099 is used.
- Mandatory notices on site: Employers must post workplace notices to inform workers of their rights under the Fair Play Act.
When construction companies treat site workers like independent contractors but then try to deny them compensation after an injury, the law gives workers a meaningful advantage.
If you have been injured on the job and believe you have been misclassified as a contractor, call the construction accident attorneys at Gorai B & Associates for a free consultation. You may have the right to sue your employer.
If you’ve been hurt and think you’ve been misclassified: Do it now
If you’ve been hurt on the job, and you suspect foul play, here’s a clear, step-by-step action plan.
1. Seek medical attention
Even if, due to a misunderstanding, you are not sure whether you can receive worker’s compensation benefits, you cannot be denied emergency medical care after an accident.
If you are unsure about your classification or rights, call your trusted work injury attorneys.
2. Document everything
- Take photos of the job site, your tools and your injuries.
- Keep texts, WhatsApp messages, or any written instructions from the foreman.
- Save pay stubs, W-2S or 1099s, and hours records.
- Note who provides your tools and whether you share equipment.
These details map directly to IRS and DOL tests and help prove the true nature of your employment relationship.
3. Consult an attorney
Obtaining legal aid matters. A skilled lawyer can:
- Review your employment documents and employment conditions
- Help build a strong case to reinstate your status
- Fight for compensation under workers’ comp or even third-party liability
- Guide you through settlement negotiations
- Represent you in court if you need to.
4. Report and get help
Follow your attorney’s lead to do the following:
- Contact the U.S. Department of Labor, Wage and Hour Division, which handles misappropriation complaints.
- Use the New York State Department of Labor’s wrongdoing class portal to file a complaint.
- File a claim with the New York Workers’ Compensation Board (WCB), even if you were paid on a 1099, you may qualify.
Misconceptions and Myths vs. Reality of Workers’ Rights
Here are some common misconceptions about misconceptions and truths:
Myth: “I signed a contractor’s contract, so I’m definitely a contractor.”
Fact: Labels don’t decide. How you act matters more than what your contract says. The IRS and courts look at actual control and relationship, not just title
Myth: “Federal rules say gig workers are not employees.”
Fact: Not always. Your status depends on multi-factor tests. And in private litigation, old or new rules (such as the 2024 DOL rule) may apply depending on the circumstances.
Myth: “Workers comp never covers contractors.”
Fact: In New York, site workers may still qualify, and WCB often claims 1099 workers as employees. WCL § 56 can make general contractors liable.
Don’t leave money on the table
Independent Contractor vs. Employee Misunderstanding is not an innocuous detail, costing injured workers thousands in lost income, out-of-pocket medical bills, and denied benefits.
If you’ve been injured on a New York construction site and suspect you’ve been misclassified, take action and consult with the construction accident attorneys at Gurib & Associates, who know how to fight for immigrant and misclassified workers.
