USA Today Reports: “States, feds crack down on firms using ‘contract workers'”


USA Today reports that companies in order to save money in this economic downturn are treating employees as “independent contractors” in name even though the employer is controlling all aspects of their employment in order to skirt federal and state wage and overtime laws and to avoid paying withholdings. If an employer controls all aspects of a worker’s terms of employment it cannot legally call them indepedent contractors and avoid the requirments of wage laws.

The article reports that this practice is growing and that lawsuits and government actions to prevent it are also on the rise. The article states:

Companies are increasingly using contractors to meet peaks in demand and complete short-term projects. The trend intensified in the recession as firms cut staff. The portion of contingent workers in the labor force is up to about 10% from 8% five years ago, Asin says.

Using these contingent workers cuts labor costs about 30%, Labor says, as employers avoid paying unemployment taxes, workers’ compensation, health care and other benefits.

About 62% of employers said at least some of their workers are misclassified, according to a September survey by SIA. Labor estimates misclassification cut federal revenue by $3.4 billion in 2010. The practice is common in construction, trucking and home health care.

The question of whether workers should be labeled employees or contractors largely hinges on whether employers control their activities. A report last week by the National Employment Law Project concluded port trucking firms misclassify most of their workers.

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