Teamsters Praise Passage of Bill to Stop Worker Misclassification

The Teamsters praised the passage of a Nebraska state bill making it illegal for employers to improperly classify workers as independent contractors, an egregious practice that has cost the state millions in tax revenue.

Gov. Dave Heineman signed Legislative Bill 563 into law on Tuesday. Jim Sheard, Secretary-Treasurer of Local 554 in Omaha, said the Teamsters fought for nearly two years to get this bill passed.

"Irresponsible employers who misclassify their workers put legitimate employers at a definite disadvantage," Sheard said. "They also cost the state between $9 million to $18 million a year in additional tax revenue. We fought hard to make sure the bill covered the transportation and construction industries."

Employers who misclassify workers can be fined up to $5,000 per misclassified worker by the state. State lawmakers overwhelmingly voted down a proposal that would have exempted the package delivery industry.

Employee misclassification is an issue being waged in statehouses across the country and on the federal level. By misclassifying workers as independent contractors, companies avoid paying 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 their workers save up to an estimated 30 percent on payroll costs, gaining an unfair advantage over their more responsible competitors. Irresponsible companies meanwhile are subsidized by law-abiding employers in the form of health insurance premiums.

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.