Or, States That Don't Suck For Employees, Part IIIWith wage theft rampant and employers trying to figure out ways to not pay employment taxes (and avoid application of employment laws), many employers try to say, "Boom! You're an independent contractor now." They shove an independent contractor agreement in front of an employee and stop paying employment taxes. The employee is told to take it or hit the road.
While the handy-dandy SS-8 form that IRS has is a good tool for employees to force employers to correctly classify them, some states have taken larger steps to protect employees against greedy employers who break the law. Here are some states that have stepped up to stop misclassification:
- California's law imposes penalties of $5000 to $25,000 on employers who deliberately misclassify workers as contractors.
- Pennsylvania, Delaware, Colorado, Minnesota, New York, and Maine have laws saying workers are presumed to be employees and setting standards employers have to overcome to prove independent contractor status.
- Connecticut has a commission that is trying to crack down on misclassification.
- Delaware imposes fines and has a form that employers must give to employees on independent contractor status in the construction industry.
- Illinois imposes penalties and interest and has an online complaint form. They have a law creating a presumption of employment in the construction industry.
- Massachusetts imposes both civil and criminal penalties on employers who misclassify.
- Montana requires independent contractors to hold an exemption certificate. Employers can be fined up to $1000 per violation for misclassifying.
- New Jersey law provides a strict test for determining independent contractor status.
- North Dakota has a process for employees to get the state to determine whether they are really employees.
- Wisconsin imposes penalties, fines up to $25,000 and can issue stop-work orders to employers who misclassify.
Misclassification is a serious problem for employees, but it also hits the states and taxpayers in the wallet in the form of unpaid taxes, unemployment compensation contributions, and worker's compensation premiums. I don't understand why every state isn't cracking down on misclassification, so maybe someone can explain it to me. Any legislators out there want to tell me why they're pro-misclassification?