No, a true independent contractor isn’t eligible for unemployment benefits. However, many people are miscategorized as self-employed independent contracts when they are really employees. Many “independent contractors” do not realize the law considers them employees, and they qualify for unemployment benefits.
Employers pay state and federal unemployment taxes to fund employee benefits. If you are an independent contractor, you don’t collect unemployment benefits because you and your customers don’t pay unemployment taxes on your work.
An accidental or intentional classification as an independent contractor can cost you employment benefits and rights. If you do not understand your employment status or have any questions, talk to an employment attorney.
How Do I Know if There Has Been a Misclassification?
Misclassification happens when an employer treats you as an independent contractor, but the law says you are an employee.
It does not matter what you or your employer call it, and you can’t rely on advice from a family member or friends, either. The rules that decide if you are an independent contractor or employee are different from state to state is the rock on steroids and getting them wrong can be expensive.
Individual laws vary state to state but we will consider some version of these factors:
1. the employer’s control of the work
a. an employee receives instructions about when, where, and how
b. an independent contractor does the job his or her way, with little instruction
2. whether the trade or business is independently conducted
a. an employee does work through the employer and not for the public
b. an independent contractor is available to the public and operates independently
3. the scope of the work or service performed
a. an employee’s work is usually merged into the employer’s business, and the business depends on the employee’s work
b. an independent contractor’s work is usually separate and not integrated into a client’s business
What Defines an Employer-Employee Relationship for Unemployment Benefits?
Examples that may show an employer-employee relationship:
a. You have a work schedule
b. Your work is supervised
c. Your employer provides training
d. You are told how to perform the work
e. Your pay is not negotiated
f. You work full time for the employer or do not have another job
g. You work at the employer’s business or where the employer tells you to work
h. Your employer provides the tools, equipment, and/or supplies need to do your job
What are the Benefits and Consequences of Misclassification?
Employers may misclassify employees as independent contractors by accident or fraud. In either case, it is important to know if your classification is correct.
As an employee you have the benefit of unemployment insurance, minimum wage, overtime pay and other protections by state and federal law.
Similarly, Social Security and Medicare tax is withheld from an employee check, and there is Worker’s Compensation coverage. These issues may go undetected until you need the benefit, or you owe money for non-payment.
What About Wage and Hour Violations?
If you were misclassified, it is possible that your employer also violated state or federal wage and hour laws by treating you and your coworkers as independent contractors.
You should talk to an employment lawyer about unpaid overtime and other legal claims that you and your coworkers may have.
Can You Be an Independent Contractor by Agreement Alone?
A label, classification, or agreement between you and the employer is not the final decision.
The interaction between the worker and employer is what determines classification.
If your employer is exercising employer rights (see employer-employee examples above), an agreement to waive your rights as an employee is probably not valid or enforceable.
Do I Qualify for Unemployment Insurance Benefits?
If you were misclassified as a self-employed independent contractor, you may qualify for unemployment benefits by showing that you were an employee, regardless of the employer’s argument.
If your unemployment benefits were already denied, presenting a misclassification argument during an appeal may succeed.
Even if your unemployment benefits application fails, you may still have a case. Many state and federal laws may apply to your employment benefits and an experienced attorney can talk with you about claims that may be available.
