Obama budget targets misclassification of independent contractors
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Much has been written over the past several days regarding the President’s budget for fiscal 2011. Pundits from both the left and right have plenty to say about it. Much of the bandying between political positions has been over the size of the budget.
However, not many have picked up on the $25M that is being directed toward a “Misclassification Initiative.” The initiative targets misclassification with 100 additional enforcement personnel and competitive grants to boost states’ incentives and capacity to address the problem of independent contractor misclassification.
As with most government initiatives, the intentions are well-founded. A statement released this week by the U.S. Department of Labor explains, “When employees are misclassified as ‘independent contractors,’ they are deprived of benefits and protections to which they are legally titled.” For example, independent contractors do not receive overtime and are ineligible to receive unemployment benefits.
Of course this is true, and there is legislation on the books in every state that makes the criteria for what is acceptable use of independent contractors clear. Additionally, revenue-strapped states have been litigating against such laws since the economy nearly crumbled in September 2008.
Businesses tend to err on the side of mitigating risk in employment and tax law. Therefore, many will think twice about using a temporary staff or independent contractor if they feel it can be even remotely considered a violation.
Leaving the unemployed with less opportunities than they have today.
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