Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries

Source: Sarah Leberstein, National Employment Law Project, June 2010

Employers increasingly misclassify their employees as independent contractors, denying them the protection of workplace laws, robbing unemployment insurance and workers compensation funds of billions of much-needed dollars, and reducing federal, state and local tax withholding and revenues. State-level task forces, commissions, and research teams are using agency audits along with unemployment insurance and workers compensation data to document the scope of independent contractor misclassification. Confirming the findings of earlier national studies, these state reports
show that 10 to 30% of employers, or even more, misclassify workers, and several million workers
may be misclassified. State and federal governments lose billions in revenues annually.

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