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AFL-CIO President Richard Trumka on Employee Misclassification Protection Act - (4/28/2010)

April 22, 2010

We applaud today's filing of the Employee Misclassification Protection Act by Sen. Sherrod Brown and Rep. Lynn Woolsey.  It is welcome news to many millions of workers who are misclassified by their employers as independent contractors, often as an excuse to avoid paying federal and state payroll taxes. This scheme allows unscrupulous employers' to cut cost by as much as 30 percent—and gives them an unfair advantage over law-abiding competitors, driving down labor standards for all workers.      

For workers affected by this practice—construction workers, hospitality workers, broadcast technicians, stage hands, musicians, home health care workers and day laborers, among many others—this bill offers a pathway to receiving labor protections that most Americans take for granted, like being paid the minimum wage and receiving overtime pay after 40 hours of work, or workers' compensation when they are hurt on the job. Workers wrongly classified as independent contractors also are denied pension or and health benefits, and are told they aren't protected by civil rights laws.

The bill would require employers to classify workers as employees, using a well-defined test that has existed since 1947, and it establishes a penalty for failing to do so. It applies common sense to the workplace, requiring that employers tell workers if they have been classified as independent contractors and how they can challenge that classification. The bill also protects workers who do challenge misclassification from retaliation.

Workers should be paid what the law says they are due. Misclassification has cost workers untold millions in wages and has cost the federal and state governments many millions in unpaid income, Social Security, unemployment and workers compensation taxes and premiums. New York City construction industry losses in payroll taxes and social insurance premiums due to misclassification are estimated at $170 million a year. In Ohio, the attorney general estimates annual costs from worker misclassification may be $100 million for unemployment insurance, more than $510 million in workers compensation premiums and almost $180 million in forgone state income tax revenues. Misclassification, he says, cost cities and villages more than $100 million in local income tax revenues in 2006, and cost school districts $7.8 million in 2008. Many other states report a similar impact. In fact, the Internal Revenue Service reported that in 1984, almost 20 percent of construction industry employers misclassified workers; a number that has surely grown.

This bill is a step in the right direction to protect workers, make sure that the country's labor standards are upheld and place all employers on a level playing field. We look forward to working with Senator Brown and Representative Woolsey and their colleagues on this important piece of legislation.  It is a crucial component in our ongoing campaign to ensure that all jobs are good jobs.

Contact Devon Whitham 202-637-5018

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