We need to stop worker misclassification and the abuse of so-called “independent contractors”
This article originally appeared on Capital & Main.
What if millions of American workers were being denied health insurance, job security and the most basic legal protections, from overtime pay to workers compensation to the right to join a union? What if tens of billions of dollars in taxpayer revenues — money desperately needed to address everything from crumbling roads to education to health care — were never making it to local, state and federal treasuries? What if thousands of companies were violating the law with impunity?
That is exactly what is happening in the United States today, thanks to a rampant practice known as worker misclassification — illegally labeling workers as independent contractors when in fact they are employees under the law. In some cases it’s occurring in plain sight, in others it’s more hidden — but regardless of the circumstances, it is taking an enormous toll on the country.
According to the Economic Policy Institute (EPI), workers misclassified as independent contractors can be found in nearly every industry, and the phenomenon has grown considerably with the rise of the gig economy. Uber, the ride-hailing company, has become the poster child for worker misclassification, with numerous lawsuits alleging that Uber wrongly classifies its drivers as independent contractors. But Uber is hardly alone — examples of worker misclassification can be found in scores of new sectors, from housecleaners to technical workers.
Workers misclassified as independent contractors are also legion in established sectors of the economy, notably residential construction, in-home caregiving and the port trucking industry. Conditions for these workers have been compared to indentured servitude, and for good reason. Misclassification enables employers to get away with widespread wage theft and a range of other illegal practices.
In a 2015 report, EPI described the advantages to employers of misclassifying workers. “Employers who misclassify avoid paying payroll taxes and workers’ compensation insurance, are not responsible for providing health insurance and are able to bypass requirements of the Fair Labor Standards Act, as well as the 1986 Immigration Reform and Control Act.” If this weren’t enough, the report continues, “misclassified workers are ineligible for unemployment insurance, workers’ compensation, minimum wage and overtime, and are forced to pay the full FICA tax and purchase their own health insurance.”