The U.S. Department of Labor’s Wage-and-Hour Division (WHD) has taken aim at independent contractor misclassification, applying a multipronged approach to address what it refers to on its website as “a serious problem for affected employees, employers, and to the entire economy.” Under the auspices of Vice President Joe Biden’s Middle Class Task Force, the Labor Department launched its “Misclassification Initiative,” which targets the practice of “improperly treating a worker who is an employee under the applicable law as in a work status other than an employee.”
The consequences of independent contractor misclassification, according to the department, is significant for workers, who are denied the protections afforded by wage-and-hour and family leave laws and are not protected by unemployment insurance and workers’ compensation, while simultaneously sapping state and federal coffers of monies that would fund Social Security, Medicare, unemployment compensation insurance and workers’ compensation funds. The Government Accountability Office estimates that worker misclassification results in unpaid taxes of more than $2.7 billion per year in unpaid Social Security, unemployment insurance and income tax, according to the Labor Department’s website. The department has taken the position that “employers who misclassify workers may achieve significant administrative and labor cost reductions, giving them a profound advantage over employers that properly classify their workers as employees.”
