What Is Employee Misclassification?
When you work for someone, there are two ways you may be classified: as an Employee, or as an Independent Contractor. Employee misclassification happens when employees are incorrectly treated as though they were Independent Contractors. This post will explain what the differences between the two are, and why it is essential that you aren’t being classified as the wrong type of worker. This is particularly relevant for Roblox development teams, in which members of the team are compensated for their work through a regular wage/salary—as opposed to partnerships, in which team members receive a percentage cut of the game’s revenue.
Why is it Important?
Employee misclassification is a serious crime in the United States, and harms employees by preventing them from receiving benefits in compensation that they otherwise would be entitled to, including being paid overtime, minimum wage, and other benefits.
As both an employer and employee in a Roblox team, it is important to protect yourself legally. Uber recently had to pay a nearly $650 million fine for employee misclassification alone! I suspect that, for Roblox development in particular, there are many developers who are missing benefits that they are very well entitled to as employees, and the consequences of this could be very serious!
Types of Worker Classification
What it Means to be Classified as an Employee
If you currently have a job outside of Roblox, chances are you are classified as an employee for the place that you work for. In the United States, this means your employer must pay you a regular paycheck, withhold taxable income for you, pay for business expenses (i.e. tools and appliances necessary for working), pay overtime if you work above 40 hours in a week, pay a minimum wage for the hours that you work, and provide other benefits.
Being an employee means your employer pays some extra taxes that would otherwise be paid by you. In addition to this, the employer usually withholds some amount of your paycheck for taxes, making it very easy to pay your taxes at the end of the year, since most of your taxes have already been set aside beforehand. You also usually have to sign a different tax form than if you were an independent contractor (for U.S. citizens, it is generally form W-4)
What it Means to be Classified as an Independent Contractor
Not all workers are classified as employees. Sometimes, an employer may have work opportunities that need to be outsourced, for which hiring an employee may not be necessary. In the context of Roblox, this could be things like hiring someone to complete a commission, or one-off jobs. In the case of a commission, chances are you have seen or created a post in the #collaboration:recruitment category explaining what exactly needed to be made, how much was going to be paid for the work to be completed, and contact details for the commission.
In addition to one-time opportunities. Roblox currently classifies its developers who use the DevEx program as independent contractors. This is because, as a roblox developer, you are given complete freedom over the content you create for the platform, and how you monetize it. Roblox does not need to pay you as a full time employee, or provide the same benefits an employee would have, because they give you this control over what you make on their platform.
Being an Independent Contractor means (at least in the U.S.) that you have to pay more taxes, and make quarterly payments, which would usually be paid by your employer if you were classified as an employee. It also means you have to sign different tax forms before your employer can pay you (for U.S. citizens, it is generally form W-9).
Misclassification — How to Identify it
What it Means to be Misclassified
Just because you are classified as an independent contractor, doesn’t mean you actually are one. You may in fact be an employee who has been misclassified. If you are the owner, or a member of a Roblox development team, there’s a good chance the members of the team should be classified as Employees, rather than Independent Contractors.
The ‘ABC’ Test’
In the recent U.S. lawsuit Dynamex Operations West, Inc. v. Superior Court, the Supreme Court laid out a test for determining whether a worker can rightfully be considered an Independent Contractor
A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work
As an Independent Contractor, the person hiring you can tell you what to do, discuss some details of the job, but cannot tell you how to do it. They cannot tell you when to work, how many hours you work, or the exact process by which you get the job done. If you are a part of a Roblox development team that has such restrictions, you may very likely be an Employee, regardless of whether you are being classified as one.
B) The worker performs work that is outside the usual course of the hiring entity’s business
This is how they got Uber for misclassification, as Uber drivers are the essential to Uber’s business model. If you retain an essential role on a development team (i.e. “Scripter”, “Builder”, “Animator”, “Soundtrack Designer”, etc.), chances are your role is essential to the business of game development. Although certain assets can be outsourced, if you are being paid regularly for a non-outsource-able role (i.e. being paid $2000 a month to work as a general scripter or builder), chances are you are an Employee, regardless of whether you are being classified as one.
C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed
As the worker in a Roblox development team, are you used to working for commissions, and do you expect loose ties with the team? If so, you could be an independent contractor. However, if you usually don’t work for commissions, and your current gig sounds like a little more than a commission, chances are you are an Employee, regardless of whether you are being classified as one.
If you believe any of these three criteria are not met in your situation, either as a team member or a team leader, it is important that the workers are classified as Employees and not Independent Contractors.
How To Identify Whether You are Classified as an Employee or Independent Contractor.
It’s actually quite simple, and mostly has to do with the tax forms the development team leader requires its team members to sign, as well as the tax forms the worker receives at the end of the year for which they were compensated. If you are part of a development team, and either had to sign, or had others sign a tax form, it is very important to know which form was signed. The tax forms are a very good indicator of how you are being classified.
Tax Forms Associated with Independent Contractors
The exact forms vary by country, so I can only speak for the United States in this post; if you live outside of the United States, or are working for someone/have workers outside of the United States, you will have to do your own research for those countries’ laws.
- If you signed Form W-9 or Form W-8 (Or any variant of W-8), you are likely classified as an independent contractor.
- If you received Form 1099 (Or any variant of 1099), you are likely classified as an independent contractor.
Form W-9 gives the employer basic information about your business as an independent contractor, and information such as your Social Security Number or Employer Identification Number, which identify you as a business entity (even if you never incorporated a business, you are treated as an “individual” operating his or her own business when you are an independent contractor).
Form 1099-MISC, which is what Roblox gives to those who use its DevEx feature, has a box for “Nonemployee compensation”, which you will need to complete your taxes as an independent contractor.
Tax Forms Associated with Employees
Again, I am only speaking for those employed by an employer based in the United States.
- If you signed Form W-4 or Form I-9, you may be classified as an employee. Form I-9 is supplimentary to W-4, and usually W-4 is the essential form for determining whether you are being classified as an employee.
- If you received Form W-2, you are likely classified as an employee.
Form I-9 is used to determine elligibility to work as an employee of a business based in the United States, and form W-4 is used to provide the employer with information on how much tax should be witheld from each paycheck.
Form W-2 gives information for the employee on how much tax has been witheld from their paychecks over the course of the tax year.
What to do if you believe you are being misclassified
If you believe you are being misclassified, especially if you are one among a number of team members, you have a number of options. Depending on what state you live in, there may be public programs in place that you can contact, which will investigate misclassification issues. Contact your local department of labor (If you are in the U.S., there should be a state department of labor, as well as the U.S. department of labor you can contact) for more information. In addition to this, if you work with other developers who are also being misclassified, make sure they are also informed of their rights as employees, and see how you can work together to resolve this issue. If you can’t work together resolving the issue internally within your organization, or get enough help from your local labor department, you may have to prosecute the organization misclassifying you.
Additionally, if you were recently laid off from an organization that you believe misclassified you, claiming unemployment benefits is a surefire way to have that organization be investigated to see whether you were misclassified. Research what unemployment benefits are available in your state or country.
Conclusion
If you are looking to start, already own, or are a part of a development team in roblox that compensates its members through a regular salary rather than a percentage cut (although you may still be an employee depending on your situation, even if you are receiving a percentage cut), I hope this post will be informative.
As an employer or development team leader, make sure to respect the rights of your team members, and know which classification is appropriate for each worker involved in the production of your Roblox game. If you compensate members based on a percentage cut as a partnership, make sure their contractual obligation to receive this percentage is made clear, and that the situation is mutually understood as a partnership. If you compensate members based on a regular salary, or hourly wage, make sure you have classified these team members correctly. Finally, if you pay for commissions, make sure you are not imposing restrictions on how they develop outsourced content, or pay for “commissions” on major, essential parts of the game that would rightfully make these workers employees.