The Economic Policy Institute calculated the cost of independent contractor misclassification to workers and recommended government action to combat the issue. A healthcare benefits services firm and a bakery face fines involving ICs and temps.
Cost of misclassification. Analysis provided by the Economic Policy Institute calculated the cost of independent contractor misclassification in 11 worker categories and issued policy recommendations for governments to combat the issue.
The worker categories examined by the EPI were those where workers are often misclassified, including construction workers, truck drivers, call center reps and retail sales workers. It calculated how much a misclassified worker would lose per year in income and job benefits compared with what they would have earned as an employee. For example, a typical construction worker working as an independent contractor would lose out on as much as $16,729 per year in income and job benefits compared with what they would have earned as an employee. Meanwhile, a typical truck driver who is misclassified would lose out on as much as $18,053 per year.
The analysis also examined the cost of misclassification to social insurance programs. For the same worker types, construction workers and truck drivers, social insurance programs lost up to $2,964 and $3,031, respectively, per misclassified worker in 2021.
The nonprofit think tank provided several actions policymakers at the federal, state and local levels should take to curb misclassification:
- Establish or expand the use of a strong, uniform protective legal test for determining employee status, such as the ABC test;
- Pass the Protecting the Right to Organize (PRO) Act, which would make it harder for employers to misclassify employees in order to prevent them from forming a union and bargaining collectively;
- Strengthen enforcement of wage theft and misclassification and fully fund the federal and state agencies responsible for enforcing workers’ wage and hour rights;
- Require employers to provide workers with transparent statements of their employment status and a justification for their classification;
- Extend basic wage and hour protections, workplace health and safety protections, paid sick leave, and other protections to independent contractors to discourage misclassification as a “race to the bottom” for worker rights; and
- Improve coordination among state and federal tax and labor enforcement agencies by establishing interagency misclassification task forces with dedicated resources and staff and strong co-enforcement partnerships capable of effectively cracking down on misclassification in targeted industries.
Read the full EPI report here.
Healthcare benefits services firm fined. A Deerfield Beach, Florida-based healthcare benefits services firm paid $106,248 in back wages and liquidated damages to 68 workers after misclassifying them as independent contractors, the US Department of Labor announced Jan. 26.
An investigation by the department’s Wage and Hour Division found Senior Healthcare Advisors LLC, which operates Medicare benefits call centers in Deerfield Beach and Pembroke Pines, Florida, paid workers straight-time rates for all hours worked, failed to pay overtime, did not include earned commissions into some employees’ regular pay rates and paid overtime at lower rates than required by the Fair Labor Standards Act.
The company also failed to inform employees of their rights under the Family and Medical Leave Act.
“Misclassifying workers as independent contractors denies them wage protections and other important benefits, making it harder for them to provide for themselves and their families,” said Wage and Hour Division District Director Daniel Cronin.
Bakery, execs face citation. A Boston-based bakery, two of its executives and five temporary staffing firms that provided its workers were issued 30 citations totaling more than $440,000 in penalties and restitution to dozens of workers for violating a variety of state wage and hour rules, including independent contractor misclassification, the Massachusetts attorney general’s office announced Jan. 25.
Dutch Maid Bakery Inc., Dutch Maid Bakery Massachusetts Business Trust and two of its executives, and staffing firm Hub Personnel Services Inc. and one of its executives were issued 11 citations in total. The citations were for wage and hour violations, including failure to pay minimum wage and overtime wages, failure to furnish true and accurate payroll records, failure to keep true and accurate payroll records, failure to furnish suitable pay stubs, failure to provide workers written notice of earned sick time leave and failure to provide adequate notice of the Temporary Worker Right to Know Law to workers.
Additional staffing firms that provided workers to Dutch Maid Bakery — Dorchester Temp Service Corp., General Employment Service Inc., Amado Enterprises Inc. and Amado Staffing dba Amado Enterprises, and AR Services Inc. — received citations for violations of minimum wage and overtime, record keeping, earned sick time, Temporary Worker Right to Know Law, misclassification of employees as independent contractors and failure to make timely payment of wages. These companies were issued a total of 19 citations.