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Unless you have a contract which guaranteed your previous rate of pay for a specified period of time, your employer retains the freedom to reduce your pay at any time for virtually any reason.
That said, it is illegal to classify a worker as a contract when in fact they are an "employee." Contractor status denies the subject worker of numerous rights, such as the right to overtime, timely payment of wages
, the ability to collect unemployment benefits
, and much more, which are rights afforded only to W2 "employees."
Generally speaking, a worker will be properly classified as an employee if the person to whom service is rendered retains significant control over the manner and means by which the work is performed. This, ultimately, is the relevant inquiry. However, additional factors frequently taken into consideration include the following:
1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
2. Whether or not the work is a part of the regular business of the principal or alleged employer;
3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
4. The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
5. Whether the service rendered requires a special skill;
6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
7. The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
8. The length of time for which the services are to be performed;
9. The degree of permanence of the working relationship;
10. The method of payment, whether by time or by the job; and
11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.
See Bostic v. Connor, et al. (1988)XXXXX 3d 144.
Even where there is an absence of control over work details, courts may find an employer-employee relationship if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary.
See here for some guidance from the Ohio Office of Unemployment
Compensation on the criteria relevant to the distinction: http://jfs.ohio.gov/ouc/uctax/comnfaq.stm
If you are unclear as to your proper classification, you can file an SS-8 form with the IRS, which will prompt a formal review of your status. See here for the form: http://www.irs.gov/pub/irs-pdf/fss8.pdf
If you are misclassified, you may be entitled to overtime, workers comp coverage, and more. This does not, however, change the fact that your employer can legally reduce your pay unless you have a contract which guarantees your previous rate for a set term.
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