Is it illegal to 1099 all hourly based employee’s?

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Is it illegal to 1099 all hourly based employee’s?

I currently work in NJ, for a company based out of CA, who has put all employees on 1099. We did not agree to this and were told that it was because the company was in the process of changing the payroll company. It has now been over 3 months and we are all still paid hourly and on 1099. We are also expected to adhere to all the rules and regulations of the company regarding how we do our jobs. Do we have any legal rights to take action against this company?

Asked on January 24, 2018 under Employment Labor Law, Pennsylvania

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

Only independant contractors are paid by a 1099; employees, including hoursly ones, are paid by W-2 *and* the employer must--
1) pay the employer share of social security and Medicare taxes;
2) provide them the same vacation and sick days as other employees working the same positions at the same location(s) (employers may provide different benefits for different positions or locations, but it can't get around providing John the same benefits it gives to coworker Jane at the same office, doing the same job, just by calling John a contractor or "1099 employee");
3) possibly provide health insurance under the same terms as offered to other employees in the same type of job at the same location; 
4) pay for all time worked, and also overtime when the hourly worker works more than 40 hours in a week.
Employers may NOT freely or arbitrarily decide who is a contractor and who is an employee; rather, they must follow the law. The law says (to oversimplify) that if the employer controls the hours and location worked and also manages or supervises the employee in how to do the job (can tell the employee not just what has to get done, but how), then that employee *is* almost certainly an employee (W-2) not independent contractor (1099). (An "independent contractor," as the term implies, has a considerable degree of independence.) You can find more-thorough discussions of when someone is--and is not--an independent contractor on the U.S Dept. of Labor and IRS websites, but essentially, if the worker is treated like an employee and not, for example, like an outside tech support or IT professional brought in temporarily to fix a specific problem or implement/install a given system or software, then that worker is an employee and must be paid as such.
If you appear to meet the criteria to be an employee but do not receive what you should, contact the state or federal department(s) of labor to inquire about filing a complaint.


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