Independent contractor misclassification isn’t just a concern for labor rights — it’s a concern when it comes to competition, Commissioner Alvaro Bedoya of the Federal Trade Commission said in a speech Feb. 2.

“People need to know that there are places here in America where people work 60, 70, 80 hours a week — and still have to pawn their wedding bands to get by,” Bedoya said. “Places where people work so long that they sleep in back of their truck — even though their homes are only a drive away — only to make 67 cents a week, or worse, end up owing their employer money.”

Misclassification helps such things happen, he said.

“The Department of Labor and the National Labor Relations Board are doing everything they can to stop it,” Bedoya said. “It’s time for competition authorities to step up to the plate.”

He raised several examples of misclassification and their impact on competition.

In one, a construction firm that employed 250 workers experienced a drop in bids it won for government work to roughly a third from 80% following the recession in the late 2000s. The suspected problem was competitors classifying workers as independent contractors. The company had to lay off workers. Information came from reports in the Miami Herald and The Sacramento Bee newspapers.

Bedoya spoke at the Global Competition Review: Law Leaders Global Summit 2024 in Miami. He was speaking for himself as a commissioner, not for the commission.

“The money at stake is staggering. Studies suggest that 10% to 30% of employers misclassify one or more of their employees,” he said. “And when workers are misclassified, they aren’t just denied the minimum wage. Their employers also don’t pay for overtime, Social Security, Medicare, workers compensation, unemployment insurance — and of course, they also don’t pay for healthcare or retirement. All told, depending on their profession, a worker may lose anywhere from $6,000 to $18,000 every year because of misclassification.”