As many employers are discovering, the misclassification of employees as independent contractors is a hot-button issue these days for workers, employers and the government—all of whom face significant consequences as a result of employee misclassification. While employers are faced with various fines and penalties, misclassified employees are being deprived of benefits they would otherwise have been entitled to receive, and government agencies are losing millions of dollars in uncollected revenue. The 2009 study examined tax year 2001. In tax year 2001, there was a $54 billion shortfall in unreported employment taxes. Therefore, it is estimated that this figure could be per annum for future tax years.1 Given the enormity of these amounts, it should come as no surprise that President Barack Obama has made the misclassification of employees a top priority for his administration.
The U.S. Department of Labor’s proposed budget for 2012 reflects the federal government’s intent to aggressively target those employers who are misclassifying employees as independent contractors. The proposed budget includes a series of initiatives directed by the Labor Department to curb employee misclassification. The focus on misclassification is evidenced by the Labor Department’s request for an additional $46 million to support a multi-agency task force to remedy employee misclassification. The Wage and Hour Division (WHD), the Office of Federal Contract Compliance Claims (OFCCP), and the Occupational Safety and Health Administration (OSHA) are each involved in this multi-agency task force initiative.
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