ACT Ohio’s recent blog post discussed the efforts by the U.S. Department of Labor to crack down on independent contractor misclassifications. A recent investigative study done by Fox 8 in New Orleans, Louisiana exposed how important these classifications are and how they can dramatically impact an entire state.
There are rampant misclassification of employees as independent contractors occurring in the state of Louisiana, which is costing taxpayers at least $250 million annually according to the Fox 8 investigative report.
The majority of contractors in the state of Louisiana participate in this misclassification practice, and are effectively rewarded for breaking the law with a 30 percent cost savings. The investigation uncovered as many as 1,500 workers who were possibly misclassified. This sort of practice, discourages other contractors from following the law.
This impacts all taxpayers because monies that should be paid by the company to the state and federal government in taxes, Medicare, employment insurance, and social security are not required if the individual is an independent contractor as opposed to a company employee. Therefore, the company is saving money and placing the taxable cost solely on the worker who is already being denied benefits and other employee perks as a result of the classification. In addition to perpetuating a fraud on local, state and federal governments, these employers gain a competitive advantage in the market place by lowering their cost of business, which allows them to undercut employers that comply with the law.
ACT Ohio continues to work with its members and various local, state and federal agencies on this important issue right here in the buckeye state.