Worker Misclassification Is Fairly Widespread
Sep 21st, 2009 | By Dawn R. Rivers | Category: RegulationsMisclassification of workers as independent contractors is a pretty widespread problem, according to a report released earlier this month by the Government Accountability Office (GAO). The precise extent of misclassification is unknown but, for example, in 1984, the Internal Revenue Service estimated that 3.4 million workers were misclassified by employers resulting in a revenue loss to the U.S. government of $1.6 billion. And, in a Labor Department-commissioned study conducted in 2000, researchers found that 10-to-30% of firms in 9 states had misclassified at least some workers.
This may turn out to be an issue in the context of the current health care reform debate. Several analysts, as well as some members of Congress, have expressed concern that some businesses will begin misclassifying their workers in order to bring their employee head count south of any “pay or play” exemption requirement, whatever it turns out to be. Others have, over the years, worried about independent contractors working without the protections enjoyed by full-time employees under federal labor law. If either of these sets of lawmakers takes it into their head to intervene, the result is likely to increase the cost of hiring independent contractors and that will, in turn, cost many of those indies a lot of business.
