Employees Misclassified as Independent Contractors: Now Employers are Taking a Stand

As I have discussed before, misclassifying employees as “independent contractors” is a very common practice in today’s economy. In some industries it is rife and employers who follow the rules are seeing that it has affected their business. The construction industry has a huge problem with misclassified employees.  Construction jobs use a lot of primary and secondary contractors on a job and these secondary contractors are the ones who misclassify their employees as independent contractors to avoid paying unemployment insurance, paying workers compensation premiums, and follow immigration laws.

Employers who try to do the right thing and play by the rules feel that they are penalized for running a business that complies with the law. Because in many states and at the federal level it is not illegal in and of itself to misclassify an employee, there has been a push to introduce laws making it illegal to misclassify employees as independent contractors.

Some employers in the Texas construction industry have been pushing for a law that would make misclassification illegal. A relatively weak bill was signed by Governor Rick Perry making misclassification on government projects illegal and subject to a $200 fine per misclassified employee.

A broader crackdown on misclassified employees failed in the Texas Legislature in 2013 due to pressure from large home builder companies. New hearings are scheduled to be held on the issue and smaller construction companies are putting their muscle behind the push for a stronger law on misclassification.

A CEO of a small roofing company wrote an open letter to Taxas lawmakers on worker misclassification. The letter is interesting as it shows how the problems caused by worker misclassification impacts employers rather than the more typical perspective of the employee.

The CEO, Mike Beeter, sums it up like this.

“Unfortunately and as a result of our own convictions, we are losing work every day where the buyers could care less about “who” is doing the work or if they are in compliance by having legitimate workers compensation insurance. It is way too easy for roofing contractors and other non-licensed trade contractors to be in business in Texas. It is difficult to be in business with strong convictions.”

In the US money talks. That is why it is good to see employer’s treating this issue as vital for the health of their companies. Legislatures at the state and federal level are more likely to listen to employers who can contribute to campaigns than individual workers who by themselves are powerless. Having business, especially small businesses, on the side of workers (at least for now) can help amplify the call for greater worker protections.

Allowing employers to misclassify employees without punishment hurts workers, the government (and by extensions us, the taxpayers), and employers who play by the rules. It is vital that states and the federal government beef up laws that protect workers and punish employers who break the rules. If a state like Texas can move toward making the practice of misclassifying employees as independent contractors illegal then it gives hope that places that are a little more worker friendly will also introduce laws to end this harmful practice.


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