Report: Worker misclassification rising
The state over the past year has been cracking down on the increasing misclassification of workers, according to a report released yesterday by a governor's task force.
The Joint Task Force on Employee Misclassification, created last year to tackle the problem of employers misclassifying their employees as independent contractors, has focused its efforts on a two-pronged approach: increase enforcement efforts and boost education and outreach to ensure employers and workers are better informed about employment laws.
The Maine Department of Labor estimates that it could cost the state between $18 million and $36 million per year in lost income tax revenues across all industries. It also costs employers and taxpayers, who have to pick up the tab for employers not paying the proper payroll taxes. Worker misclassification has increased in Maine over the past six years, according to the labor department, which audits 2% of employers every year. In 2004, misclassification of workers was found in 29% of employers audited across all industries. In 2007, it was 41%. "I think that as the economy becomes tighter employers attempt to cut costs," says Laura Fortman, labor commissioner and chair of the task force.
As for enforcement, the task force report says the group has been busy "dismantling the silos that have traditionally existed between state agencies" and that state agencies are sharing information not shared in the past. For example, the Workers Compensation Board now shares a list of employers and workers requesting predetermination of independent contractor status with the Bureau of Unemployment Compensation. It has also set up a tip line to allow people to report cases of worker misclassification. The number of audits the labor department does, however, will not increase because it does not have enough staff, Fortman says.
As part of outreach effort, the task force will continue to hold seminars and speak with stakeholders. It has also determined to better publicize successful enforcement actions, including cases brought against chronic offenders. In its conclusion, the task force reiterated why it sees fighting worker misclassification as an important issue in Maine. "Especially in these difficult economic times, Maine must collect every dollar of tax revenue legitimately owed to it. Otherwise, law-abiding citizens and businesses must make up for those who are not paying their fair share."
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