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  1. #1

    Default Filing for Unemployment While Disputing Classification as an Independent Contractor

    My question involves independent contractors in the state of: New Jersey

    First, let me say that I wish I had known of this forum prior to beginning my current journey through employment law.

    I live in Connecticut and have worked remotely from my home since April 2015 for an LLC licensed in the state of New Jersey. The position is a telecommute position. I have a few questions that I would like to have some input on because I am confused about what to expect and what to do.

    1. I was hired by contract in April, 2015. The contract states that I am an employee/consultant. It states that I will begin as a consultant and be transitioned to full time employee status on or before July 1, 2015. This transition never occurred in spite of many promises. The company has never withheld taxes from my pay and the owner maintains that I am an IC. Last week, I filed an SS-8 with the IRS for determination of employee/IC status. I worked set hours, all work done was assigned and monitored by my supervisors or company owner, and I was part of a team whose work is integral to the company's business. Pay is annual salary, paid monthly, and is determined by the company. I use my own personal PC and printer (which I owned prior to hire). All software, email, training, and VPN connections used are provided by the employer. The work must be performed by me personally. I do not own my own business and I have no other contracts or employment. I think I have a good case for classification as an employee.

    2. The company has not paid me for work performed in November and December due to lack of funds (per the owner). Last week, I filed an unpaid wages claim with the New Jersey DOL.

    3. Last week, I also notified the company owner that I cannot continue to work without pay and would be taking a leave of absence. I then sent a letter notifying the company of the leave of absence. I chose the leave of absence rather than quitting because I know of former ICs who worked for the company who did not receive any owed back wages at all after quitting.

    4. My questions are: Should I formally terminate my employment/contract (there are no penalties for doing so per my contract) and file for unemployment based upon reasonable cause of unpaid wages? Do the legal experts here think I have a good case to be determined an employee by the IRS? Will the unpaid wages claim filed with the NJ DOL cause an investigation into the company's classification of it's workers?

    Thanks to all for your help with my questions. I have been quite confused and feel lost. This company is my only source of income. I am currently seeking other employment and do not intend to return to work for this company.

  2. #2
    Join Date
    Feb 2008
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    1,179

    Default Re: Filing for Unemployment While Disputing Classification as an Independent Contract

    At this point if you have been classified (even incorrectly) as an IC, your state won't have any record of any wages because the employer hasn't been paying into UI for you. (#1) -- they generally look back at the prior 4 quarters not including the current quarter. Who did you work for prior to that? And were you an employee with wages that the employer paid UI taxes for? You might be able to get some wage credit from that, but I doubt you will see wage credits for 4/15 and onwards (so probably 2-3 quarters out of 4 will be $0) until someone requires your employer to pay back UI taxes owed and to report back wages (as IC wages don't count)

    I also doubt a wage claim (#2) will work until you can get a determination from the IRS on the ee/IC status. Because again, the payment owed falls under a contract, not under wage law at this point. You'd have to take the employer to court under contract law.

    #3 I hope others chime in, but I think that taking an LOA will hurt any UI claim because you haven't had a full separation from service. They are going to want to see that your working conditions (no pay in 2 months) was a good reason to QUIT not to take an LOA.

    I think you are not in a great place right now for either UI or a wage claim until the status of the ee/IC is cleared up. In hindsight, you should have done that a long time ago if you had questions about it. Usually unemployment claims are NOT paid retroactively. Don't know what would happen if the employer is required to pay UI taxes late and credit wages late. They might recalculate what you get going forward from the date of your claim. So it might not hurt to file the claim realizing you might not get much currently until other issues are settled.

    As to how and how long the IRS will take to make the determination, I do not know.

  3. #3

    Default Re: Filing for Unemployment While Disputing Classification as an Independent Contract

    Thanks for the input. I was on unemployment prior to working for this company and the benefits from my former employer are exhausted. I know the SS-8 process is long and drawn out and that I must formally quit to file unemployment. I fully expect to be employed again before the IRS ee/IC determination is made. I wish I had filed an SS-8 much earlier but I was unaware that I had the right to contest my employee status. I didn't know I had any choice but to except what my employer said until payments ceased and I started to research what recourse I had under the law. So at this point, I am trying to determine what is the best course of action for me.

  4. #4
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    Default Re: Filing for Unemployment While Disputing Classification as an Independent Contract

    Quote Quoting working4aliving
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    Thanks for the input. I was on unemployment prior to working for this company and the benefits from my former employer are exhausted. I know the SS-8 process is long and drawn out and that I must formally quit to file unemployment. I fully expect to be employed again before the IRS ee/IC determination is made. I wish I had filed an SS-8 much earlier but I was unaware that I had the right to contest my employee status. I didn't know I had any choice but to except what my employer said until payments ceased and I started to research what recourse I had under the law. So at this point, I am trying to determine what is the best course of action for me.
    When you file your tax return, use form 8919 instead of filling out a Schedule C. That will save you from having to pay the employer's share of SS and Medicare taxes.

  5. #5
    Join Date
    Mar 2012
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    1,360

    Default Re: Filing for Unemployment While Disputing Classification as an Independent Contract

    Go ahead and file for unemployment. You'll get a monetary determination that shows that you had no wages in the base period on which to base a claim. The monetary award has appeal rights. Appeal it. I hope you kept good pay records. Send them in. NJ UI is also capable of doing an employee/IC determination. If it's determined that you should have been a covered employee, NJ will create a base period for you.

  6. #6

    Default Re: Filing for Unemployment While Disputing Classification as an Independent Contract

    Quote Quoting chyvan
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    Go ahead and file for unemployment. You'll get a monetary determination that shows that you had no wages in the base period on which to base a claim. The monetary award has appeal rights. Appeal it. I hope you kept good pay records. Send them in. NJ UI is also capable of doing an employee/IC determination. If it's determined that you should have been a covered employee, NJ will create a base period for you.
    Thank you. I do not have pay stubs because the company has not provided them with my pay. I do have my timesheets and my bank statements showing check and direct deposits from the company to my account.

    Quote Quoting llworking
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    When you file your tax return, use form 8919 instead of filling out a Schedule C. That will save you from having to pay the employer's share of SS and Medicare taxes.
    Good advice. Thank you.

  7. #7
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    Default Re: Filing for Unemployment While Disputing Classification as an Independent Contract

    Quote Quoting working4aliving
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    Thank you. I do not have pay stubs because the company has not provided them with my pay. I do have my timesheets and my bank statements showing check and direct deposits from the company to my account.
    That's sufficient.

  8. #8
    Join Date
    Jan 2015
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    1,142

    Default Re: Filing for Unemployment While Disputing Classification as an Independent Contract

    Quote Quoting working4aliving
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    Thanks for the input. I was on unemployment prior to working for this company and the benefits from my former employer are exhausted. I know the SS-8 process is long and drawn out and that I must formally quit to file unemployment. I fully expect to be employed again before the IRS ee/IC determination is made. I wish I had filed an SS-8 much earlier but I was unaware that I had the right to contest my employee status. I didn't know I had any choice but to except what my employer said until payments ceased and I started to research what recourse I had under the law. So at this point, I am trying to determine what is the best course of action for me.
    You will not have monetary eligibility at the time of filing. But file that claim immediately. No you do not have to formally quit to file for unemployment. But why do you care? You shouldn't be working for this company that is misclassifying you and not paying you anyway. Any week that you are not paid, you can file a claim without doing a formal quitting exercise. Just file the claim. Tell them the situation.

    When you are declared monetarily ineligible for benefits, which is very likely to happen, you will request an appeal of this decision, stating that you were incorrectly classified as an independent contractor by your last employer. You will need to provide dates you worked and amounts of wages you were paid, preferably with hard documents like check stubs or bank statements showing how much you were paid. They'll do an investigation.

    The IRS does not have to make the decision about incorrect classification before you can qualify for unemployment insurance, the agency can do so internally. The two agencies do not cross reference on this issue or provide information to each other. If the unemployment system determine that you were in fact, misclassified, and that the employer should have been paying in unemployment taxes based upon your wages, then it is possible for you to be certified and begin receiving benefits (if you have enough wages in the used quarters IF they had been counted correctly as covered wages). Since the employer hasn't paid the unemployment taxes, your unemployment insurance would come from the state's general pool and the department would try to recoup the wages from the employer who was misclassifying you.

    File a claim for unemployment benefits. Let them tell you that you are monetarily ineligible. File an appeal of this monetary determination. In the meantime, keep making weekly certifications for unemployment benefits until you find another job. Participate in any and all work searching activities they suggest for you. You can get unemployment retroactively back to the time a claim is filed if you have made weekly certifications for benefits each week since and you are later determined to be eligible and are approved for benefits. If and when you are approved in these circumstances, you'll be back paid for each week you have certified for since the date you filed the claim.

  9. #9

    Default Re: Filing for Unemployment While Disputing Classification as an Independent Contract

    Quote Quoting comment/ator
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    You will not have monetary eligibility at the time of filing. But file that claim immediately. No you do not have to formally quit to file for unemployment. But why do you care? You shouldn't be working for this company that is misclassifying you and not paying you anyway. Any week that you are not paid, you can file a claim without doing a formal quitting exercise. Just file the claim. Tell them the situation.
    This is extremely helpful. I will be filing the claim first thing on Monday. You are right, the company is at fault for my lack of income. If denied, I will appeal. I have my bank statements and check images from the company showing everything I was paid in 2015. Thank you.

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