Lawrence Rebman, director of the Missouri Department of Labor and Industrial Relations, spelled it out very clearly in his recent Director’s Spotlight entitled Worker Misclassification is Bad for Business. He states the case against those employers who misclassify their employees in the State of Missouri to avoid the payment of unemployment taxes, payroll taxes, unemployment taxes, sick pay, overtime, health insurance, vacation pay and several other items. His article reports that those employers who are caught misclassifying their workers as independent contractors without passing the smell test are subject to $50 per employee per day up to the max of $50,000 and also subject to the Division of Employment Security (DES) being able to penalize the misclassifying employer up to 25% of the amount being defrauded from the state. Rebman reports:
“The DES efforts in 2010 allowed the agency to identify projected delinquent taxes of $819,000, which is more than six times the 2009 amount. The Department will continue to work towards identifying employers cheating the system, and leveling the playing field for all employers conducting business in Missouri.”
Perhaps one of the worst aspects of the problem is that the workers who have been wrongly misclassified cannot take advantage of the “safety nets” offered by the state to those workers injured or laid off. This has been a growing problem in Missouri and in the 29 other states that have passed Worker Protection Laws in the last two years.
Look for national bills to move through Congress this year as state after state recognizes the magnitude of the problem and how much it is contributing to their budget shortfalls.