A Guide to 1099 Employee Rights for Contractors and Clients
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- Contractors and clients must know a contractor’s legal rights to engage in the appropriate professional relationship and avoid worker misclassification.
- Independent contractors lack certain anti-discrimination and labor rights and must take steps to protect themselves.
- The integrality of independent contractors in today’s workforce has led many business owners to provide contractors the same benefits as their employees.
The term 1099 employee can be misleading since contractors are not employees in the legal sense; they are self-employed and have different rights and responsibilities. We explore 1099 employee rights below.
1099 Employee Rights
Right to a contract
Sudarshan Sivaraman, Head of Customer Success & SaleS, Turing
Right to control the workflow
Right to control when and where they work
Right to intellectual property
Check out our primer on intellectual property protection for global teams.
Right to employ others
Oscar Mastroberti, Head of Recruiting and HR, DevBase
Beware of worker misclassification
Worker misclassification is an illegal practice in which a company categorizes workers as independent contractors while treating them as employees. If the arrangement resembles an employment relationship, the contractor is considered an employee under the law and should be entitled to employee benefits and protections such as a pension plan, paid time off, and health insurance.
Rules defining employees and contractors vary by region. According to the US Department of Labor (DOL), several factors can help determine whether a client is treating a contractor like an employee; these include:
- If a client expects the contractor to work at their office
- If a client tries to assert a degree of control over a contractors working hours
- If a client does not allow the contactor to work with other clients
- If a client expects the contractor to accept additional work
If a contractor believes they have been misclassified or that a client has breached their rights, they can contact a legal professional for advice and challenge their employment status. If a contractor can make a case for misclassification, they can file a lawsuit that could harm a company’s reputation and result in financial and legal penalties.
Chloe Riesenberg, People Specialist, Project44
Rights contractors don’t have
Although being an independent contractor means having the flexibility to work for different clients from wherever and whenever they want, there are privileges full-time employees have that contractors don’t. We cover these rights below.
Harassment and discrimination rights
While no independent contractor should experience harassment or discrimination, they may not be legally protected under labor laws. For example, federal anti-discrimination laws enforced by the United States Equal Employment Opportunity Commission do not cover contractors. Still, regional laws may provide broader protection. For example, anti-discrimination laws apply to independent contractors in some states, such as New York and Maryland.
Independent contractors also lack protection from the Family Medical Leave Act, the Americans with Disabilities Act, Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, and the Fair Labor Standards Act.
However, some state courts have determined equal opportunity rights for both independent contractors and employees. According to the legal advocacy group, A Better Balance, state-legislated protections exist in Maryland, Minnesota, New York, and Rhode Island.
California, New Jersey, Pennsylvania, and Washington have their own specific protections.
Minimum wage and overtime pay
Independent contractors are not entitled to a minimum wage guaranteed under federal law by the Fair Labor Standards Act and do not receive overtime pay since they do not have set hours. Even if a contractor spends additional time on a deliverable, the client is not obligated to pay them more than what they agreed to in the contract.
David Stepania, Founder, ThirstySprout
Clients do not contribute to an independent contractor’s unemployment benefits. If a client decides to end the relationship, unemployment insurance is the contractor’s responsibility. Every 1099 employee should therefore invest in the state’s unemployment fund in case this scenario arises.
Tax withholding arrangements
When a 1099 employee engages with a client, they assume the responsibility to keep track of and pay self-employment tax and income tax to state and federal governments. The client is not obligated to withhold earnings or contribute to Medicare tax and Social Security tax as they would for employees. Contractors will need to pay this themselves.
For more tax information, check out our complete guide for independent contractor taxes.
If an independent contractor has an accident and is injured while working, a client company doesn’t have to pay compensation benefits. However, contractors in some states can contribute to a state workers’ compensation fund to protect against such situations.
Vacation or paid holiday
Contractors are their own bosses, which means they can take time away from work whenever they want. However, no work means no pay. Therefore, the contractor must set aside money for vacations and holidays so that they can take the time off they need.
Clients must treat independent contractors as collaborators
Independent contractors comprise a large portion of the global workforce and are true collaborators in a company’s mission and success. Their integralness has led many business owners to provide contractors the same benefits as their employees to ensure they feel valued, remain productive, and deliver the desired results.
Join the Deel Community
If you’re a contractor, we invite you to join the Deel community, a one-stop platform for collaborating, networking, and supporting global workers.
Discover contractor community meetups in your neighborhood, get quick access to vetted resources, webinars, and exclusive perks, and connect with thousands of members worldwide to discuss topics such as immigration, traveling, working remotely with kids, and finding work-from-home jobs.
Treat contractors right with Deel
If you’re managing a workforce with contractors, consider using Deel. Deel is a global HR and payroll platform enabling companies of all sizes to hire, manage and pay contractors and employees worldwide.
Contractors benefit from compliant and localized contracts, more than 15 payment options in 120+ currencies (including crypto), automated invoicing, and in-app support. Hiring companies avoid compliance and misclassification risks and save 86 hours of HR admin every month.
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