Employee Not Entitled to Recap Taxes Withheld While Misclassified as Independent Contractor

Umland v. Planco Financial Serv., Inc., No. 06-4688 (3d Cir., September 9, 2008) – Plaintiff, a Regional Marketing Director, signed an “Independent Contractor Agreement” and for the first three years of her engagement she was classified as such.  She remitted a percentage of her self-employment income in taxes under the Self-Employment Contributions Act (SECA), and her employer did not withhold taxes and did not pay employer Federal Insurance Contributions Act (FICA) taxes.  When her status was later changed to “employee,” the employer began to withhold FICA taxes, and plaintiff sought recovery of the SECA taxes previously paid. 

The Third Circuit Court of Appeals rejected the plaintiff’s claims, finding that her state law claims were preempted by federal law, and that federal law provided no basis for recovery against her employer.

Note: This article was published in the October 2008 issue of the New Jersey eAuthority.