Independent Contractor Abuse Targeted

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Department of Labor logoThe U.S. Labor Department (DOL) announced last week that it has teamed up with California to go after employers who misclassify contract workers who should be treated as employees with all the pay, health insurance and other benefits that regular workers receive. The U.S. Department of Labor and state officials characterized their new efforts as an issue of fairness for employees who are being underpaid and missing out on benefits and for competitors who are at a financial disadvantage for abiding by the law.

According to a statement issued by the DOL, “The misclassification of employees as something else, such as independent contractors, presents a serious problem, as these employees often are denied access to critical benefits and protections — such as family and medical leave, overtime compensation, minimum wage pay and unemployment insurance — to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often struggle to compete with those who are skirting the law.”

According to the Department, the federal government collected more than $5 million in back wages for minimum wage and overtime violations after finding that employees had been misclassified as independent contractors or otherwise not treated as employees. 

Another huge motivation for the Department is the recovery of lost income tax revenue and Social Security and Medicare payments, as well as losses to the state coffers for unemployment insurance and workers’ compensation.

“California is proud to enter into this partnership with the U.S. Department of Labor to work together to attack the problems of the underground economy,” said California Labor Commissioner Julie A. Su. “Governor Brown just signed an important law that went into effect on January 1, increasing penalties for willful misclassification. With the Labor Department, we are poised to use all the tools in our arsenal to lift the floor for hardworking employers and employees throughout the state.” 

The joint federal program is just the latest by California officials to go after employers not adhering to employment laws. “This is further evidence that state and federal governments are getting serious about the underground economy and non-compliant contractors,” stated John A. Norwood, President of SPEC. “We now have local, statewide and federal programs supported by SPEC combating this important issue. It is the type of resources that SPEC’s participation in the Construction Enforcement Coalition was designed to accomplish.”

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