Teamsters Praise Legislation To Stop Worker Misclassification

Teamsters General President Jim Hoffa praised legislation introduced today that would make worker misclassification a violation of federal labor laws, increasing penalties for companies found to improperly classify workers as independent contractors.

"Workers misclassified as independent contractors receive no protection from workplace health and safety laws, no legal rights to equal opportunity in the workplace, no rights to job-protected family and medical leave," Hoffa said. "Their rights to form a union are also denied. These employers are clearly violating federal labor laws and ripping off the American taxpayer. They must be held accountable."

The legislation is sponsored by Sen. Sherrod Brown, D-Ohio, and by Rep. Lynn Woolsey, D-Calif.

By misclassifying workers as independent contractors, companies avoid withholding income taxes and paying Social Security and Medicare taxes. Each year, more than $4.7 billion in federal income and employment tax revenue is lost due to misclassification, and billions more are lost at the state level. Companies that misclassify workers save up to an estimated 30 percent on payroll costs, gaining an unfair advantage over their more responsible competitors.

Hoffa also praised other efforts in the Obama administration to crack down on misclassification, an increasingly troubling practice by companies to avoid their fair share at a time when local, state and federal governments are cutting services and jobs due to dwindling tax revenue.

Rep. Jim McDermott, D-Wash., and Sen. John Kerry, D-Mass., have introduced legislation to close the tax loopholes that let businesses off the hook for misclassification. Also, the IRS is undertaking a three-year effort to audit employers to identify cases of misclassification. The Obama administration has proposed a new Labor Department initiative to step up enforcement and help states that are doing a good job of going after violators. Rep. Jerrold Nadler, D-N.Y., will soon be proposing a measure to address the widespread misclassification of port truck drivers.

Last week, the Nebraska Legislature passed a bill making it illegal for employers to improperly classify workers as independent contractors, and many other states are undertaking efforts to crack down on the practice.