It has been estimated by the Bureau of Labor Statistics that in some parts of the country nearly 30 percent of workers are labeled by their employers as "independent contractors" -- freeing them from paying Social Security, unemployment insurance and other benefit taxes while sidestepping labor law.
According to the Electrical Workers union(IBEW):
In 2007, the Government Accountability Office reported that 10 million workers were classified as independent contractors, an increase of more than 2 million in just six years.
Misclassification ends up costing federal and state authorities billions in lost revenue. Companies that report employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes.
But misclassifying workers also cheats workers out of their rights and benefits. Laws regarding overtime, workers' compensation, sick days and minimum wage don't apply to independent contractors.
This denies many workers their basic rights and protections and means less revenues to the Treasury and competitive advantage for employers who misclassify," Jared Bernstein told the New York Times. Bernstein is a noted economist and aide to Vice President Joseph Biden. "The last thing you want is to give a competitive advantage to employers who are breaking the rules.
IBEW Organizer Bob Brock has seen first hand how misclassifying employees has prevented workers from exercising their rights:
Brock has been trying to organize workers who install home satellite dishes for more than a year. Many of these workers—located mostly in Idaho, Montana and Colorado—endure long hours, low pay, draconian work rules and unsafe working conditions. But according to their employers—including Direct TV and Star West Satellite—they are their own bosses.
Most of these (satellite) companies operate a whole separate wing, which they staff with what they call independent contractors," Brock said. "But they have to follow the companies' regulations, their work hours and use their equipment. What kind of boss is that?
The practice became widespread under the Bush administration but now many state and local officials are beginning to crack down:
President Obama has promised to hire an additional 100 investigators to look at companies accused of misclassifying workers and the Internal Revenue Service announced in February that it was launching a three-year nationwide investigation of the practice.
On Capitol Hill, Massachusetts Sen. John Kerry (D) has introduced the Taxpayer Responsibility, Accountability, and Consistency Act of 2009—with Rep. Jim McDermott (D-Wash.) sponsoring a House version—which beefs up enforcement of worker classification regulations and closes tax loopholes used by unscrupulous employers.
In April, Ohio Sen. Sherrod Brown (D) introduced a similar bill—the Employee Misclassification Act—that focuses on tougher enforcement of the Fair Labor Standards Act.
The Department of Labor also recently announced tougher regulations of worker classification regulations, calling on employers to disclose to their employees their work status.
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