Dive Brief:
-
Congress has rejected a proposal for $10 million to fund a U.S. Department of Labor effort to help states crack down on companies that misclassify employees as independent contractors.
-
The DOL granted 19 states $10.2 million last year to bolster or start worker misclassification enforcement. In four states — Maryland, New Jersey, Texas and Utah — the grant included a $2 million “high-performance bonus” to improve efforts to identify firms that either misclassify employees or fail to report payroll wages — or pay taxes on them.
-
The National Association of Home Builders opposed the funding, saying the grants could create an incentive for state labor agencies to “find misclassification where none exists,” the association said in a press release. “Any attempt that undermines the legitimate uses of independent contractors in the marketplace will have a detrimental impact on companies that do business with independent contractors,” NAHB argued in a blog post.
Dive Insight:
NAHB, which is part of the Coalition to Promote Independent Entrepreneurs, said the group supports efforts by state agencies to educate workers about the laws regarding independent contractors rather than spending money “incentivizing a worker misclassification finding.”
A 2014 report by journalists at The McClatchy Co. uncovered rampant worker misclassification in the construction industry. Employers were found to claim that legitimate employees were independent contractors so they would not have to pay payroll taxes, unemployment or workers’ compensation for those workers.
The practice often leads to “wage theft” — paying laborers less than their promised wages, in cash. A May 2015 report by the University of Massachusetts Amherst found that wage theft has reached “epidemic levels” in that state.