State will target worker misclassification
Employers who misclassify get unfair advantage
By Charlotte Eby Journal Des Moines Bureau| Posted: Wednesday, December 31, 2008
DES MOINES -- Gov. Chet Culver and state labor officials say many employers are skirting the law by hiring workers as independent contractors rather than regular employees, and better enforcement is needed.
They say the practice, which they said occurs in the construction industry, strips those workers of medical benefits if they are injured on the job and deprives them of other benefits and legal protections.
Culver said the misclassification of workers is an attempt by some employers to avoid paying into benefits systems such as Medicare, Social Security and workers' compensation.
"Employers who do this take the low road to unfair financial advantage over businesses who play by the rules, and workers are the ones who pay the price," Culver said.
Culver ordered a government task force earlier this year to study the issue, and released the task force's final report Tuesday surrounded by leaders of organized labor.
The task force recommended a new 9-member unit to investigate and enforce worker classification. The unit would be part of Iowa Workforce Development, the state agency that enforces labor laws, and is expected to cost about $771,000.
The task force also is calling for new outreach efforts including a hotline and Web site to educate the public on the law.
Workers who are misclassified are deprived of the protection of workers' compensation, unemployment benefits and labor laws on minimum wage, family medical leave, overtime and discrimination.
But state officials acknowledged no current state penalty exists for employers that misclassify workers, except that they have to pay back taxes.
Culver said penalties should be put in place, although it was not one of his task force's recommendations.
Buzz Malone, president of Laborers' Local 566 in Ottumwa, said he is most concerned about the human cost of employee misclassification.
"The construction industry is a virtual meat grinder that we place our young people into," Malone said. "No other industry in this nation claims more lives every year or disables more bodies."
Malone detailed his own struggles as a teenager recruited into construction, where he was hired as a subcontractor and exposed to asbestos.
The task force said firms that unlawfully misclassify employees can underbid law-abiding businesses required to pay normal payroll-related costs.
They also said worker misclassification means the state loses out on tax revenues, which could be recovered and help pay for the cost of the new enforcement unit.
Scott Newhard, vice president for public affairs for the Associated General Contractors of Iowa, said it's a problem when blanket statements are made about contractors misclassifying workers.
He said the organization is supportive of greater enforcement against contractors that intentionally misclassify workers.
"We don't want people that do that to be competing, particularly for any public work," Newhard said.
The members of the organization are contractors for highway and municipal utility projects, most of which are public. Newhard said regulations require those contractors to certify their payrolls.
Charlotte Eby can be reached at 515-422-9061or chareby@aol.com.
They say the practice, which they said occurs in the construction industry, strips those workers of medical benefits if they are injured on the job and deprives them of other benefits and legal protections.
Culver said the misclassification of workers is an attempt by some employers to avoid paying into benefits systems such as Medicare, Social Security and workers' compensation.
"Employers who do this take the low road to unfair financial advantage over businesses who play by the rules, and workers are the ones who pay the price," Culver said.
Culver ordered a government task force earlier this year to study the issue, and released the task force's final report Tuesday surrounded by leaders of organized labor.
The task force recommended a new 9-member unit to investigate and enforce worker classification. The unit would be part of Iowa Workforce Development, the state agency that enforces labor laws, and is expected to cost about $771,000.
The task force also is calling for new outreach efforts including a hotline and Web site to educate the public on the law.
Workers who are misclassified are deprived of the protection of workers' compensation, unemployment benefits and labor laws on minimum wage, family medical leave, overtime and discrimination.
But state officials acknowledged no current state penalty exists for employers that misclassify workers, except that they have to pay back taxes.
Culver said penalties should be put in place, although it was not one of his task force's recommendations.
Buzz Malone, president of Laborers' Local 566 in Ottumwa, said he is most concerned about the human cost of employee misclassification.
"The construction industry is a virtual meat grinder that we place our young people into," Malone said. "No other industry in this nation claims more lives every year or disables more bodies."
Malone detailed his own struggles as a teenager recruited into construction, where he was hired as a subcontractor and exposed to asbestos.
The task force said firms that unlawfully misclassify employees can underbid law-abiding businesses required to pay normal payroll-related costs.
They also said worker misclassification means the state loses out on tax revenues, which could be recovered and help pay for the cost of the new enforcement unit.
Scott Newhard, vice president for public affairs for the Associated General Contractors of Iowa, said it's a problem when blanket statements are made about contractors misclassifying workers.
He said the organization is supportive of greater enforcement against contractors that intentionally misclassify workers.
"We don't want people that do that to be competing, particularly for any public work," Newhard said.
The members of the organization are contractors for highway and municipal utility projects, most of which are public. Newhard said regulations require those contractors to certify their payrolls.
Charlotte Eby can be reached at 515-422-9061or chareby@aol.com.
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