Independent Contractor Not Paid For Work? You Need To Know This...

During tough times, businesses may find themselves having to reduce the pay of their employees. Sometimes, companies fail to pay non-employee workers or freelancers, independent contractors and other service providers. 

As an independent contractor not paid for work, you might be wondering what you should do. Whether it affects your "employer-employee relationship" or not, you may have to seek legal action to get your rightful payment. 

Freelancers and employees have different pay situations and legal protection for non-payment. Employers are legally obligated to pay their employees on time. As a self-employed worker with an online business, you are not covered by federal or state employment laws. You should know your legal rights in this situation. 

If you're an independent contractor not paid for work, then chances are - you're currently dealing with these scenarios.

  1. You completed your tasks before the deadline and are now dealing with payment issues (lower payment, late payment, no payment, etc.) from the client.
  2. The business misclassified you as an "independent contractor". If you're providing your service on an ongoing basis, and meet certain requirements, you could be an employee.

Independent Contractor: Payment Issues

Employees get paid based on a set schedule (weekly or monthly) while independent contractors get paid upon the completion of gigs after both parties agree.

As a freelancer, you have the right to receive payments. For instance, independent contractors will generally submit invoices with detailed information about the tasks.

This includes:

  • Deadline of the task
  • Compensation for the task
  • Work performance

Independent contractors aren't covered by minimum wage or other employment laws but they're able to earn based on the set price and amount of work completed (Uber, Lyft, etc.).

With the right to receive payments, self-employed freelancers also have the rights to a contract, control, decisions, work full-time or part-time, work anywhere, advertise, and work with other freelancers. Independent contractors can also implement late fee penalties for when a client doesn't pay (check out our article on typical late fees for invoices).

If you're dealing with payment problems from a client, then going to a small claims court is your next solution.

Suing For Unpaid Wages

When an independent contractor has unpaid wages after delivering the work based on the agreed written contract, they have the right to reach out to an employment attorney for legal advice.

Employees are protected by State and Federal Laws when it comes to their legal rights, discrimination laws, hour laws, unemployment benefits, and labor laws.

As for independent contractors, they aren't entitled to many of these laws. However, they are permitted to sue the person under the contract for nonpayment in a small claims court.

 You may have to schedule a visit to a small claims court to get your payment. 

To distinguish the differences between the two, read the following comparisons below.

Independent Contractor: Misclassification

Employers are exempt from paying certain taxes for workers classified as independent contractors. Companies unethically misclassify workers as freelancers so they can save money by not providing employee benefits, payroll taxes, health insurance, overtime pay, and following other employment laws. 

If you happened to be a victim of illegal misclassification, you may qualify for:

  1. Unpaid wages 
  2. Employee benefits
  3. Workers' compensation
  4. Unpaid work time
  5. Minimum wage
  6. Sick days

What you demand also depends on your state laws. For example, as an independent contractor in California,  the Assembly Bill (AB) 5 covers the "employment status" of a worker in addition to other laborer laws. Employees are protected by the United States Department of Labor under the Fair Labor Standards Act (FLSA), which are rights to minimum wage, overtime, etc.

Once you identify your working status and learn about your state laws, you can request a ruling from the IRS to change your title from an independent contractor to an employee. In the event when you're unsure of what actions to take, you can approach this situation by filing a complaint to your employer.

Employee Vs. Independent Contractor

These are the indicators to identify the differences between and an employee and an independent contractor. This will play a huge factor in determining whether you qualify for employee benefits or not.

Degree of Control

  • Employees - They are told what to do, have directions from their employers, and work continuously for the company.
  • Independent Contractors - They have more control and authority.

Number of Hours

  • Employees - They have a set scheduled assigned by their employers. 
  • Independent Contractors - They can work whenever as long as the task is completed by the deadline.

Work Expectations

  • Employees - They have continuous work and sometimes specific tasks assigned by their employers.
  • Independent Contractors - They have specific tasks to complete according to a written contract.

Liabilities (Injuries, etc.)

  • Employees - They are the employer's responsibility.
  • Independent Contractors -  They are liable for themselves.

Resources

  • Employees - They are provided with resources for work from the company.
  • Independent Contractors - They utilize their own resources to complete tasks on their own.

Taxes

  • Employees - Income tax is deducted by the hiring company.
  • Independent Contractors - Pays their own freelancer taxes.

Payment

  • Employees - They are paid according to a set scheduled. (weekly, monthly, etc.)
  • Independent Contractors - They are paid for each gig completed.

If you work for Uber or Lyft, keep in mind that the United States Supreme Court ruled drivers as independent contractors more than a year ago. For others, this next section will guide you to your benefits if you're an independent contractor working a full-time job for a specific company.

Filing A Complaint To Your Employer

Don't hesitate to file a complaint to your "employer" even when you're not 100% sure. According to the Fair Labor Standards Act, employees are entitled to fair pay and many other government benefits. 

If you believe that you're misclassified and being paid unfairly, you should document these problems and notify your employer. After all - it is a place of business, so don't hold back if you're feeling skeptical in any circumstances. Below are the reasons why you should file a complaint to better improve your work life.

Reasons to file a complaint:

  1. Your wages are too low for the amount of work you're putting in.
  2. You didn't receive your overtime pay after putting in countless hours.
  3. You didn't receive money on your paid sick day.
  4. Your paycheck has missing money and didn't count for all the hours you put in.

Unlike misclassification issues, another problem independent contractors deal with are payment issues. There are times when clients aren't paying on time, paying less than agreed upon, or not paying at all. In such cases, you can bring this matter into a small claims court.

The Bottom Line

If you're an independent contractor not paid for work, you have the right to bring it to a small claims court. If you're working long hours for a company and feel like the pay is unfair, there's a possibility that you're an employee and were illegally misclassified.

Andy Lam

Andy Lam

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Andy is a copywriter from California that focuses on scaling and growing online businesses. His favorite activities include blogging and learning about the market economy. With his finance blog, his goal is to help readers from around the world.

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Note: at Keeper Tax, we're on a mission to help freelancers overcome the complexity of their taxes. That sometimes leads us to generalize tax advice. Please reach out via email if you have questions.

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