Can Independent Contractors File For Unemployment?

Independent contractors don't qualify for unemployment benefits unless they've been misclassified.

By , J.D.

Question: Can I Get Unemployment Benefits as an Independent Contractor?

I was a technical writer for a software company: manuals, instructions, help interview scripts, and similar text. I was employed by the company for several years. Then, a couple of years ago, the company decided to lay off its technical writers and rehire all of us as freelancers.

We had to sign an independent contractor agreement, but not much else changed. I still work full time, report my hours each week, and attend staff meetings. I'm in the office one or two days a week, and I put in the rest of my time at home. I don't get benefits, and I have to pay self-employment taxes. The company just laid us all off. Can I obtain unemployment benefits?

Answer: Independent Contractors Cannot Receive Unemployment Benefits.

Unemployment benefits are designed for employees whose employers pay state and federal unemployment taxes to fund the unemployment system. Ordinarily, when you're an independent contractor (also called a 1099 employee), you can't collect unemployment if you're out of work. Neither independent contractors, nor their clients or customers, pay state or federal unemployment taxes.

However, you could qualify for unemployment benefits if you've been misclassified as an independent contractor. Based on the information you provided, it sounds like you might have been misclassified and should have been classified as an employee instead.

    Unemployment Benefits When You've Been Misclassified as an Independent Contractor

    Each state's unemployment agency has its own rules for determining whether a worker is an employee or an independent contractor. In general, though, true independent contractors are people who are in business for themselves and have control over the way that they perform their work.

    Often, contracting jobs are limited in time and scope. If, for example, you were hired to write one manual or script a set of help interviews, you would more likely be a 1099 employee. Independent contractors typically work on a project basis and work for multiple clients at a time, or in succession. Employees, on the other hand, are usually hired on an indefinite basis. Employees are also more likely to work full time, report their hours, participate in staff meetings, and receive supervision and training from the employer.

    The fact that you were an employee before you were labeled an "independent contractor" by your company will probably also help. It suggests that your employer reclassified its freelancers to avoid paying taxes, providing benefits, and taking on other costs relating to your work (including, not coincidentally, the cost of unemployment claims). This is a common practice, and it's also illegal.

    You should apply for unemployment benefits, claiming that you were really an employee. If your claim is denied, you should appeal. To find out how to appeal an unemployment determination, select your state from the list at Collecting Unemployment Benefits.

    In your appeal, explain that your employer misclassified you as an independent contractor. Among other things, state that you work only for that employer, that you are required to turn in your hours, that you must attend staff meetings, and that you regularly work at the employer's place of business.

    You should also mention that you worked for the company as an employee for several years and that your working relationship remained largely the same, even after your employer moved you to independent contractor status. (For a list of the factors that will help you prove you are really an employee, see Independent Contractor or Employee: How Government Agencies Make the Call.)

    How to Check Whether You're Eligible for Unemployment

    To find out whether you qualify for unemployment benefits, you need to apply through your state unemployment office. You can find a link to your state unemployment office at the Unemployment Benefits Finder.

    Get Help From a Lawyer

    If you were misclassified, your employer may also have violated wage and hour laws by treating you like an independent contractor rather than an employee. You, and your coworkers in the same boat, may want to talk to an experienced lawyer about unpaid overtime and other legal claims that you may have against your employer.

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