The federal Department of Labor (DOL) budget for fiscal year 2015 is official, and it includes new programs and additional protections for workers and employees. This is exciting news for millions of Americans, including the long-term unemployed, students who want to work when they graduate, and current employees whose employers may not be following the law as they should. Check out the changes that are being put in place to help you.
One of the most pervasive scams that employers use to lower their workers’ wages is misclassification – that is, turning their workers into independent contractors or temps when they are actually employees. Misclassification shouldn’t be mistaken for the whim of an errant employer. On the contrary, it’s a strategy that has been used to transform entire industries.
From an employer’s perspective, the benefits of misclassification are clear. Turning a worker into a temp or a free agent obviates any need to provide him with benefits. It shields the employer from legal liability for health and safety violations, for industrial accidents, or from wage and hour violations. It invariably lowers such workers wages as well. It makes it impossible for workers to form unions.
Worker misclassification is now a bet-the-company issue.
On February 21, 2004, the Illinois Supreme Court rejected a constitutional challenge to Illinois’s Employee Classification Act (the “ECA”), a law that defines most individuals who perform construction-related services as employees of the company who retains them, even if the relationship is set up as an independent contractor relationship. Illinois’s ECA is one of the strictest worker misclassification statutes in the country.
Bartlow v. Costigan arose out of a preliminary finding that a small construction firm, Jack’s Roofing, had misclassified 10 workers as independent contractors instead of employees for periods ranging from 8 to 160 days in 2008. The Illinois Department of Labor calculated a potential penalty for having misclassified these 10 workers as $1.6 Million. Under the Illinois misclassification law, each day that each worker is misclassified is considered a separate violation, with fines of up to $1,000 for a first offense. Willful violations result in triple damages. Subsequent violations double the penalties again.
(Please note that the date of this court decision is actually February 21, 2014)
Nearly 50,000 of the 75,000 port truckers in the U.S. are misclassified as independent contractors, according to a recent report, which says the misclassification costs federal and state governments significant tax losses.
The Feb. 19 report was sponsored by the National Employment Law Project, Los Angeles Alliance for a New Economy and Change to Win Strategic Organizing Center – all three worker advocacy groups.
Construction companies across Texas that work on public projects are on notice now that the targeted worker misclassification crackdown passed by the legislature in 2013 has taken effect.
HB 2015 “Worker Classification” was signed into law on June 14, 2013, and became effective on January 1, 2014. This law is considered by many to be a good first step in the fight against the problem that is especially rampant in residential and commercial construction. But, advocates for workers and for a fair marketplace understand that much more needs to be done in the years to come if the playing field is going to be leveled so that ethical companies will be able to compete. While putting these penalties in place on public projects will help in the commercial sector, nothing at all will change in residential construction.
California Labor Commissioner Julie Su has cited a Sacramento landscaping company with $665,000 in wage theft violations over a three-year period.
Sanctions against Michael Mello, owner of Green Valley Landscaping Services, include minimum wage violations of $338,175 for more than 40 employees, $169,088 in unpaid overtime and $157,500 for failure to provide itemized wage statements as required by California law.
BOSTON – Thursday, September 5, 2013 – Labor and Workforce Development Secretary Joanne F. Goldstein today announced Massachusetts has recovered more than $21 million over an 18-month period in owed revenue recaptured through the collaborative work of the state’s Joint Enforcement Task Force on the Underground Economy and Employee Misclassification (the Joint Task Force). This recovered amount is greater than the sum of all previous years combined as detailed in the Joint Task Force’s 2012 Annual Report.
Misclassification of workers as independent contractors remains a top employment law problem area, frequently resulting in fines, orders for back wage payments, penalties and an array of headaches for unsuspecting employers. Proper classification of workers can be difficult for several reasons:
- There is no singular definition of employee or independent contractor under federal or state law.
- An agreement between an employer and a worker that the worker is an independent contractor may have little, and in some instances, no legal significance. Independent contractor is a legal status determined by factors that go beyond the employer’s and employee’s desire to contract for work on a certain basis. Written agreements can be quite helpful, but are not dispositive.
- Both federal and state policy has been trending towards classifying workers as employees due to perceived governmental and individual worker benefits from employee payroll withholding, workers’ compensation and unemployment insurance.
- The relationship between employer and worker frequently evolves over time, and even a well-intentioned employer can find that a worker once properly classified as an independent contractor has now become misclassified.
The Politics of Wage Suppression: Inside ALEC’s Legislative Campaign Against Low-Paid Workers
• ALEC’s “model legislation” includes multiple proposals to weaken or repeal wage standards that protect the earnings of low-‐paid workers. These proposals include measures to repeal state minimum wage laws, reduce minimum wage rates for youth and tipped workers, weaken overtime compensation policies, and block local governments from establishing living wage ordinances.
• Since January 2011, legislators from 31 states have introduced 105 bills that aim to suppress the wages of low-‐paid workers by repealing or weakening core wage standards at the state or local level. 67 of these 105 bills were directly sponsored or co-‐sponsored by ALEC-‐affiliated legislators from 25 states.
• As conservative majorities assume power in 31 statehouses this year – including 15 statehouses under the control of veto-‐proof supermajorities – ALEC’s wage suppression agenda poses a threat to the earnings and economic security of low-‐paid workers across the country.
US Labor Department, Iowa Workforce Development Sign Agreement to Reduce Misclassification of Employees as Independent Contractors
Officials of the U.S. Department of Labor’s Wage and Hour Division and Iowa Workforce Development today signed a memorandum of understanding to protect the rights of employees by preventing their misclassification as independent contractors by employers.
“This memorandum of understanding sends a clear message: We’re standing united to end the practice of misclassifying employees,” said Mary Beth Maxwell, acting deputy administrator of the Wage and Hour Division,”This is an important step toward making sure that the American dream is still available for employees and responsible employers alike.”