Feds, States Cracking Down On Employee Misclassification

Employer misclassification of workers as independent contractors has hurt workers and the states where they live and work in many significant ways for several decades. Annually, it costs federal and state government agencies billions of dollars in revenue. Misclassification deprives workers of rights under federal and state labor and employment laws. These include laws that provide anti-discrimination and wage and hour protections, as well as unemployment and workers’ compensation benefits.

To thwart employer misclassification, many states have adopted the ABC test to determine employee status. The Protecting the Right to Organize (PRO) Act is federal legislation that would establish the ABC test in federal labor law. The result would be stronger protection for all workers’ right to organize and collectively bargain. The Bill was passed by the House of Representatives in March of 2021. It now is in the Senate.

The last decade has seen society’s transcendence to a “gig economy” as services such as Uber and Door Dash, while affecting our everyday life in how we eat and get around from one place to the next, have grown at the expense of misclassifying and exploiting workers.

The misclassification of employees as independent contractors costs the federal and state governments millions of dollars in tax revenue and workers’ comp fund contributions. In addition to these significant losses, misclassification also prevents workers from obtaining benefits traditionally received by employees, such as health insurance or retirement plans.

With the enactment of AB5, California adopted the ABC test in 2019. However, a corporate-funded ballot initiative, Proposition 22, was passed that exempted ride-share drivers and delivery drivers who work for app-based companies like Lyft from AB5. This result deprives workers of essential rights and protections that many workers and activists over centuries have worked hard to achieve.

It unfairly burdens those companies that abide by federal and state law and correctly classify and treat their workers as employees. Misclassification causes employers who properly classify workers to bear the burden of paying workers’ compensation and unemployment premiums.

States like New York, Virginia, Illinois, Maine, Delaware, Maryland, New Jersey, Pennsylvania, and Massachusetts have passed worker misclassification laws, many specifically targeting construction industry employers. Under Virginia’s new laws, workers are presumed to be employees of a business that utilizes and pays for their services unless the business can prove that the worker is an independent contractor.

If the intended purposes of AB5 and the PRO Act are to be realized, Implementation of the ABC Test must be accompanied by proper funding so that the law is strongly enforced. The past has clearly shown that bold statutory language, by itself, is inadequate to protect misclassified workers resulting in the continued deprivation of their valuable rights.

California employees have the legal right to compensation if their employers violate federal and state employment laws, including laws that prohibit misclassification. The experienced and knowledgeable employment law attorneys at Moss Bollinger will help ensure that your rights as a California worker are

protected if your employer has engaged in any illegal conduct under federal or California law. Contact Moss Bollinger today at (310) 982-2291 or reach us online.