How much does employer misclassification cost you?

“Independent contractors” who are told what to wear, when they’ll work, what they’ll do, and how they’ll do it are NOT independent contractors.

At least, not under the law.

But a lot of employers are skirting the law, and some are committing outright fraud. The good news is some states are starting make major progress.

WorkCompCentral’s Todd Foster has a great investigative piece in this morning’s edition detailing the progress made in North Carolina by the Industrial Commission.

This isn’t pennies, folks – this fraud cost North Carolina and the US $467 million just in lost tax revenue.

It also

  • reduced workers’ comp premiums,
  • hurt local hospitals and healthcare providers who had to provide care to injured workers with no insurance,
  • likely bankrupted workers who weren’t able to work due to their injuries and were billed for medical care, and
  • drove up costs for the legitimate businesses in NC who weren’t committing fraud.

According to investigative reporting by the McClatchy news organization,

if the level of misclassification found on 64 government-backed housing developments extends to the construction industry as a whole in North Carolina, the state and federal government are losing $467 million a year in taxes. That’s roughly the size of the budget shortfall legislators initially faced this year as they tried to find ways to give raises to public-school teachers.

The construction industry is rife with this practice, unscrupulous contractors underbidding responsible competitors by avoiding workers’ comp premiums, taxes, and labor regulations. The McClatchy investigation found construction misclassification happens on up to 40% of job sites.; the worst states tend to be in the South, where legislation has stalled in several legislative sessions.

There have been some efforts both nationally and in individual states to address this crime, but reports are it is still rampant – on smaller projects and even on federal worksites, municipal projects, huge construction sites including highways, sewer plants, schools and airports.

A lot more information is here.

What does this mean for you?

If you are a work comp insurer, service company, TPA, construction worker or legitimate contractor, you’re getting screwed by these crooks.

2 thoughts on “How much does employer misclassification cost you?

  1. If states and others get serious about WC fraud, I think you are going to find that missing claim volume that everyone is concerned about.

  2. North Carolina contractors that break the law cross the border into surrounding states. Better enforcement in NC will help the region. Georgia needs to follow NC’s lead.

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