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Worker Misclassification

Millions of U.S. workers have been misclassified by their employers as “independent contractors,” making it easier for their employers to underpay them and violate their employment and labor rights. Employers misclassify their employees by giving them an IRS Form 1099 rather than a W-2, or by paying them in cash and not withholding any taxes. Loopholes in the law also mean employers can legally misclassify their employees when 25 percent of their industry is also guilty of misclassification.

The Government Accountability Office (GAO) estimates misclassification costs the federal treasury $2.72 billion every year in unpaid, Social Security, unemployment and income taxes. Misclassification is especially high in jobs that feature higher concentrations of immigrant workers and women such as day labor, delivery and trucking, child care, home-based work and construction.

The AFL-CIO and member unions, especially the Laborers and other building and construction trades unions, are especially active in lobbying for legislation that would make it more difficult to misclassify workers. The National Day Laborers Organizing Network (NDLON) and the Domestic Workers United (DWU) are also active in this advocacy, and work to educate their members and constituents about misclassification.

Sens. John Kerry (D-Mass.), Tom Harkin (D-Iowa) and Scott Brown (R-Mass.) have introduced legislation in Congress to crack down on worker misclassification, and the U.S. Department of Labor plans to issue a regulation to update recordkeeping requirements for employers to ensure better compliance with the law and assist with enforcement. 

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