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Working: U.S. and local governments crack down on employers who pay workers as contractors

If your independent contractors clock in and follow your instructions for completing their tasks, maybe you’re requiring too much of them. Maybe they should be considered employees and not independent contractors, government labor experts say.  The federal government as well as states, including Maryland, are cracking down on employers who treat what should be workers as contractors. Governments are losing millions of dollars in payroll tax and other revenue and workers are losing benefits, including Social Security, health care and unemployment insurance. Getting the classification right is important, labor experts say, because if found guilty of misclassifying workers a business can be fined thousands of dollars and required to pay thousands more in back wages to the worker.  An employer who misclassifies workers as contractors “has a competitive edge,” said Richard A. Sebeck, program manager for the Maryland Department of Labor, Licensing and Regulation’s Division of Labor and Industry. “It’s bad for all honest businessmen.”  Moreover, employees misclassified as contractors, Sebeck added, who “get hurt on the job can’t get workers compensation. If they’re laid off, they may not be entitled to unemployment” benefits.

In 2009, Maryland enacted a law targeting employers in the construction field who misclassify workers as independent contractors. Since then, the state has started investigations in about 450 cases. The U.S. Labor Department and the Internal Revenue Service also are joining forces to step up enforcement in a wide array of industries.  The efforts come as businesses are increasingly turning to independent contractors or freelancers to save money or avoid hiring staff who may end up being let go a few months later. Various government agencies have estimated that 20 to 35 percent of all employers have mistakenly or intentionally classified people as independent contractors when they really should be on staff.  Nancy Leppink, deputy director of the U.S. Department of Labor’s Wage and Hour Division, said misclassifying workers already is “more pervasive” than it has been before, and it has jumped from the construction and home building industry to restaurants, health care and government contractors. (click on link to read full story) 

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