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Governor Culver Receives Worker Misclassification Task Force Report

31 Dec, 2008 WorkersCompensation.com

                               
Des Moines, IA (CompNewsNetwork) – Members of the Worker Misclassification Task Force submitted its final report and recommendations to Governor Chet Culver today in a meeting at the Governor's Office.  

"Employers who work hard and contribute to the local economy should not have to compete with business owners who choose to break the law for their own unfair advantage," said Governor Chet Culver. "Independent contractor reform will make it easier for honest businesses and contractors to compete by removing the unfair advantage of employee misclassification, and as a result improve the lives of hard working men and women across the state. I look forward to reviewing the report, and I thank the members of the task force for their commitment to Iowa's workers."

Governor Culver created the task force in July to address issues surrounding worker misclassification in Iowa.  The task force, which consisted of representatives from the Governor's Office, Iowa Workforce Development (IWD), the Iowa Department of Revenue (IDR), the Iowa Department of Economic Development (IDED), and chaired by IWD Director Elisabeth Buck, held five public meetings and one public hearing.  In addition, three subcommittees met several times to gather information on worker misclassification, define its scope, and suggest possible remedies.

The Task Force identified three ways that worker misclassification affects the people of Iowa:

    * The state loses important tax revenues, even more critical now in the face of increasing demands from a climbing unemployment rate and natural disaster losses;

    * Conditions for a fair and competitive marketplace are sabotaged.  Companies that unlawfully misclassify employees as independent contractors and, as a result, fail to account for normal payroll-related costs and taxes, can underbid law-abiding businesses who are required to pay these expenses as a part of their overhead; and 

    * Misclassified workers are wrongfully deprived of the protection of workers' compensation, unemployment, minimum wage, overtime, family medical leave, discrimination, and several other important labor and employment laws.

After talking with hundreds of Iowans, and meeting with interested parties, the task force made the following recommendations to the Governor:

   1. Create a special Misclassification Unit within IWD to address misclassification issues through research, investigation and enforcement.  The Task Force believes the creation of this unit may result in additional tax revenues to the state treasury that could exceed the expense of the unit. 

   2. Develop misclassification educational materials and outreach efforts, such as a hotline and web site, for the general public.  This effort should be led by the new Misclassification Unit at IWD, and can be completed at little to no cost.

   3. Review state agency regulations, including those of the IDR and IWD, to determine to what extent agencies can share misclassification information.  

   4. Aggressively pursue a data sharing agreement with the IRS to track instances of employer misclassification of workers.

   5. Retain the current, similar "common law" definition for independent contractor/employee in use by the applicable state agencies for at least one more enforcement year.  The Task Force observes that maintaining the current "common law" definition is appropriate and reasonable at this time and that any required statutory review and potential change should come after a year of enhanced enforcement efforts.

   6. Reconvene the Misclassification Task Force following a year of enhanced enforcement efforts to review any suggested changes in laws or regulations.  Research materials should be forward to Director Buck at IWD.

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