Employee Misclassification and Related Damages Claims
Kerri Keohane and David Schap. 2021. Employee Misclassification and Related Damages Claims. Journal of Legal Economics 27(1): pp. 63–82.
Misclassification occurs when a person who has legal status as an employee is treated by an employer as an independent contractor. Independent contractor status, when not afoul of legal norms, can benefit both parties. Misclassification, however, is thought to result in cost savings to the employer at the expense of the worker, the employer’s competitors, and government revenues. Three main tests determining employee status exist in the statutes of the various U.S. states, but each main test varies somewhat depending on the particular jurisdiction involved. Misclassification can lead to claims involving losses associated with fringe benefits, business-related expenses, and minimum wage and overtime pay. For each of these types of losses, certain damage claims and applicable case law are reviewed.