The Economic Policy Institute released a report that concludes that misclassifying workers as independent contractors is costly to both the workers and to the states in which the workers work.
Summary: Workers misclassified as independent contractors lose out on critical protections, benefits, and labor rights including minimum wage, overtime pay, unemployment insurance, the right to form a union, and anti-discrimination protections in most states.Executive summary
- Workers misclassified as independent contractors lose out on critical protections, benefits, and labor rights including minimum wage, overtime pay, unemployment insurance, the right to form a union, and anti-discrimination protections in most states. Additionally, these workers bear the full financial costs of Social Security and Medicare contributions.
- This analysis estimates the cost of independent contractor status for 11 commonly misclassified jobs. For example, a typical construction worker, as an independent contractor, would lose as much as $19,526 per year in income and job benefits compared with what they would have earned as an employee. A typical truck driver, as an independent contractor, would lose as much as $21,532 per year in income and job benefits compared with what they would have earned as an employee.
- Lost compensation due to misclassification also varies by state. Estimated annual per-worker costs in lost compensation are as high as $26,253 for truck drivers in New Jersey.
- Home health care aides, janitors, and landscapers are some of the occupations most affected by misclassification, as well as being relatively low-paying jobs. Misclassification further threatens the economic security of these workers leaving them vulnerable to exploitation and harmful labor practices.