The improper classification of employees as independent contractors has received much criticism and debate amongst labor officials, business owners and community leaders.
Workers’ rights advocacy groups and government agencies have increased awareness in the area of employee/independent contractor classification in an effort to combat this growing national problem. The industries most likely to misclassify its workers include construction, landscaping, restaurants and health care. Employers who misclassify their workers deny them important labor law protections including minimum wage and overtime pay, workers compensation, unemployment insurance and federal taxes.
Recent GAO and USDOL data have found that misclassifying workers creates an unfair economic burden to legitimate businesses which play by the rules and creates an uneven playing field for competition. Employers that skirt paying benefits are at a competitive advantage when bidding on state and/or federal contracts because they disguise their workforce as independent contractors to avoid the costs associated with hiring an employee.
On a national level, the USDOL has signed Memorandum of Understandings (MOUs) with thirteen states to address worker classification and provide a mechanism to conduct joint investigations and trainings to recoup back wages and benefits on behalf of improperly classified workers. Much of the criticism surrounding employee/independent contractor classification focuses on the alleged attack on the business owner’s bottom line and the attempt to eliminate independent contractors as a business model. However, the purpose and intent of each law is to protect workers and afford the responsible business owner the opportunity to compete fairly.