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New York State
Department of Labor

Andrew M. Cuomo, Governor Peter M. Rivera, Commissioner

Labor Agencies Back Federal Legislation to Protect Workers from Being Improperly Classified as Independent Contractors

Employee Misclassification Impacts Worker Benefits, Government Revenues and Law-Abiding Businesses

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Albany, NY (June 17, 2010) -

Labor agency heads from New York and Iowa today joined forces in asking federal lawmakers to improve conditions for both workers and businesses by passing the Employee Misclassification Prevention Act, which was introduced by Senator Sherrod Brown and Rep. Lynn Wolsey in April 2010.  Employee misclassification occurs when a business improperly denies a worker the benefits and protections provided to an "employee" as that term is defined by state and federal law.  Misclassification hurts workers, deprives the government of tax revenue, and undercuts legitimate employers who classify their workers correctly.

This legislation would prevent millions of American workers from being misclassified as independent contractors, while ensuring that law-abiding businesses are not undercut by cheaters who are gaming the system.  New York State Labor Commissioner Colleen C. Gardner is testifying in favor of the legislation on Thursday, June 17 before the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP). 

A number of state governors across the country have issued Executive Orders that establish task forces to combat employee misclassification. Other states have passed laws and introduced sweeping legislation to combat this plague on the American workforce. 

 The Employee Misclassification Prevention Act will help states expand their work.  It requires that offices and divisions within the U.S. Department of Labor share information on misclassification violations and carry out targeted enforcement sweeps. This will have the same positive effects nationally that data-sharing and enforcement coordination have had in other states.  In addition, many of the bill's provisions will help states detect and deter business models that use incorrectly classified independent contractors. 

"Employee misclassification is an epidemic happening on Main Streets across the country," said New York Labor Commissioner Colleen C. Gardner.  "Since the New York Joint Enforcement Task Force on Employee Misclassification began in 2007, 12 other states have established structures similar to ours.   Today I implore our lawmakers to take action on this bill immediately."

From its creation in September 2007 through the end of March 2010, New York's efforts have:

  • Triggered 67 coordinated enforcement actions in a dozen cities throughout the State,
  • Identified nearly 35,000 instances of employee misclassification,
  • Discovered over $457 million in unreported wages,
  • Located more than $13.2 million in unemployment insurance taxes due and
  • Uncovered over $14 million in unpaid wages.

"Employers that improperly classify their workers as independent contractors create an unfair playing field by lowering their costs of doing business in comparison to employers who follow the law," stated Iowa Workforce Development Director Elisabeth Buck.  "Additionally, misclassified workers are denied access to workers' compensation coverage and unemployment benefits if needed, creating the potential for a greater economic burden to communities."

The State of Iowa, on recommendations from the Governor's Misclassification Task Force, appropriated funding to establish a misclassification unit for the State.  In the first year of activities, the unit has discovered:

  • 182 employers who misclassified 1,565 workers,
  • Unreported wages totaling more than $27 million,
  • Unemployment taxes, penalties and interest due of more than $1.3 million.
  • Hundreds of cases that are still in the investigation stages with numerous tips flowing into the department daily.

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