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Worker Misclassification - (6/23/2008)

Worker Misclassification
There is a nationwide crisis affecting the Construction Industry. This crisis is the misclassification of “Employees” as “Independent Contractors”. Contractors can use this type of misclassification to secure construction projects by simply excluding payroll taxes, unemployment taxes, state taxes and workers compensation premiums. This gives them an unfair advantage in securing contracts over the contractors that play by the rules and pay their required taxes.
 The worker that is classified as an Independent Contractor is also at a disadvantage since they lose all protections that are granted to all employees. These protections include workers compensation, unemployment benefits, Social Security, Medicare, pensions and health care. Workers that are misclassified as independent contractors are also responsible for the normal employee as well s employer taxes on the income earned from being classified as an independent contractor. This has led to 1099’s never get reported or submitted as tax returns. Ultimately the federal, state and city agencies that have subsidized these projects never recover the tax revenue that is owed. The tax payer will often subsidize the project twice. The misclassified worker does not have any protections under the National Labor Relations Act or with the Department of Labor.

There are several studies being conducted today that show the revenue loss and impact these workers have on the economy at the federal and states level. The losses are in the hundreds of millions of dollars in taxes and workers compensation premiums. This year Congress has held hearings to address this issue. Many states and local governments have begun to enact or are considering the implementation of laws that include severe penalties and criminal charges for intentionally misclassifying employees as independent contractors.

Use this form if you suspect an employer is committing fraud by misclassifying its workers. link

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