Teamsters Support Senate Efforts to Protect Workers from Misclassification

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International Brotherhood of Teamsters

Jun 17, 2010, 04:47 ET

Bad-Acting Employers Shirk Taxes, Deny Workers' Rights

WASHINGTON, June 17 /PRNewswire-USNewswire/ -- The Teamsters Union supports efforts by the U.S. Senate to crack down on businesses that illegally classify their employees as independent contractors, an egregious practice that companies use to avoid paying millions in state and federal taxes.

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The Senate Health, Education, Labor and Pensions Committee held a hearing today to discuss efforts to crack down on the growing problem of misclassification. More than 40 states are currently looking into ways to punish bad-acting employers who misclassify workers, and 15 states have said that collectively, misclassification costs them $3.2 billion annually.

"Irresponsible employers who misclassify workers do this for one main reason: to avoid paying their share of state and federal taxes so they can pad their profits," said Teamsters General President Jim Hoffa. "These companies also hurt workers by not properly giving them the benefits they deserve as full-time workers."

"Workers who are misclassified as independent contractors get no sick time, vacation, health benefits or any of the rights or legal protections afforded to full-time employees under the law," Hoffa added. "The Teamsters are determined to make sure this practice comes to an end."

The Teamsters have been waging a successful campaign to battle misclassification. In April, the Nebraska Legislature passed a bill making it illegal for employers to improperly classify workers as independent contractors. Teamsters Local 554 in Omaha, Neb., worked for nearly two years to get the bill passed.

Other states have been making great strides in fighting misclassification. In Nevada, the State Commission on Misclassification adopted recommendations on bad-acting employers that included fines of up to $25,000 per misclassified worker. It also has recommended the creation of a state misclassification task force.

In just one year, the Iowa Workforce Development Agency found 182 employers out of 251 investigated had misclassified 1,565 workers. The agency recouped more than $1 million in taxes and $342,000 in penalties.

In Vermont, a new law mandates that the Labor Department must issue a stop-work order if an investigation reveals that there are workers who are not covered by workers' compensation insurance. The new law also enhances existing penalties and adds new ones, including civil and criminal fines and imprisonment for violating a stop-work order.

At the Port of Los Angeles, truck drivers work long hours, but are paid by the load because they are classified as independent contractors. If they are hurt or sick and cannot work, they are not paid. It's no wonder their trucks have been called "sweatshops on wheels."

The Teamsters also praised other efforts to crack down on misclassification. In April, a bill was introduced that would make worker misclassification a violation of federal labor laws. Another bill would close the tax loopholes that let businesses off the hook for misclassification. And the Obama administration has proposed a new Labor Department initiative to step up enforcement and help states that are doing a good job of going after violators.

Each year, more than $4.7 billion in federal income and employment tax revenue is lost due to misclassification and billions more are lost at the state level.

Founded in 1903, the International Brotherhood of Teamsters represents 1.4 million hardworking men and women in the United States, Canada and Puerto Rico. For more information, visit www.Teamster.org.

SOURCE International Brotherhood of Teamsters