WASHINGTON D.C. – U.S. Sen. Sherrod Brown (D-OH) and Attorney General Richard Cordray discussed new efforts to prevent workers from being misclassified as independent contractors. So-called “worker misclassification” undermines the competitiveness of businesses that are following the rules, and deprives workers of the protection and benefits they have earned.
"For too long, workers have been denied vital worker safeguards - like fair labor standards, health and safety protections, and UI or workers' compensation benefits," Brown said. "With a still fragile economic recovery and significant job loss, workers are too often taken advantage of and lose out on the benefits they rightfully earned. Meanwhile, employers who do right by their employees are placed at a disadvantage when competitors are cutting corners."
Brown announced new legislation, the Employee Misclassification Prevention Act (EMPA), which would ensure access to safeguards like fair labor standards, health and safety protections, and unemployment and workers’ compensation benefits. Corday will release data estimating approximately 459,000 misclassified workers in Ohio and outlining the efforts to combat misclassification by an inter-agency task force led by the Attorney General’s office.
Tens of thousands of employers misclassify their employees as independent contractors, and as a result, these workers are not eligible for benefits such as minimum wage and overtime, unemployment insurance, and workers’ compensation. Misclassified workers are also not protected by anti-discrimination and health and safety laws. Misclassification also undermines the budgets of state and local governments – resulting in increased costs for taxpayers or reduced services. The Obama Administration estimates that better record-keeping could raise $7 billion over the next ten years.
“This isn't an issue that only affects a select few," said Cordray. "Businesses that misclassify workers illegally harm their workers, their competitors and their communities. Hundreds of millions of tax dollars are lost, which are dollars that Ohio cannot spare, especially during the current economic climate. Sen. Brown's new legislation, in conjunction with my office's task force, will put Ohio on the fast track to clamping down on businesses who game the system."
In the summer of 2008, Attorney General Cordray formed a first-of-its-kind inter-agency task force to combat worker misclassification. The task force is a collaborative effort between Ohio Department of Job and Family Services (ODJFS), Bureau of Workers Compensation (BWC), and Ohio Department of Taxation (ODT). Cordray today announced the following accomplishments as a result of the united commitment of these agencies:
• The Attorney General's revenue recovery section is currently seeking collection related to misclassification violations on 818 open cases against 55 employers.
• The agencies worked together to draft a common definition of "employee" for consideration by the Ohio General Assembly. This much-needed definition would allow for more uniform enforcement by agencies.
• Increased/reassigned agency resources applied to misclassification: ODJFS now has funding approval for nine additional auditors; Department of Taxation is implementing a data warehousing program that will allow searches for violators; and BWC has reallocated resources to increase targeted audits by 30 percent.
• Ohio is teaming up with 15 other states in negotiations to end worker misclassification by FedEx.
• The Attorney General's office recently settled a case with five home health care companies. The settlement provided that workers will be classified as employees rather than contractors beginning July 2010 and paid the BWC approximately $330,000.
The EMPA would reduce the number of misclassification violations by:
• Ensuring that employers keep records that reflect the accurate status of each worker as an employee or non-employee and clarifying that employers should not violate the Fair Labor Standards Act when they misclassify workers.
• Increasing penalties on employers who misclassify their employees and are found to have violated employees’ overtime or minimum wage rights.
• Requiring employers to notify workers of their classification as an employee or non-employee
• Creating an “employee rights web site” to inform workers about their federal and state wage and hour rights.
• Providing protections to workers who are discriminated against because they have sought to be accurately classified.
EMPA would improve federal and state efforts to detect and stop misclassification by:
• Mandating that states conduct audits to identify employers who misclassify workers and by requiring that DOL monitor states’ efforts to identify misclassification.
• Directing states to strengthen their own penalties for worker misclassification.
• Permitting DOL and IRS to refer incidents of misclassification to one another.
• Directing DOL to perform targeted audits focusing on employers in industries that frequently misclassify employees.