Misclassification Costs Indiana As Much As $400 Million A Year

This week, nwiTimes.com (Northwest Indiana) wrote about a 2008 University of Missouri-Kansas City study which revealed the extent of worker misclassification and the resulting cost to state and local governments.  As in other states, the problem is noted to be widespread, especially in the Indiana construction industry. 

Misclassified workers who don’t report all of their income and who go without unemployment and worker compensation insurance represent lost tax revenue for the state in an economy where all departments are struggling to reduce their budgets. Ironically, employers who misclassify their workers are often rewarded with government jobs because by breaking the rules they are able to submit lower bids for construction projects.  This is precisely why State Representative David Niezgodski is looking to strengthen Indiana laws to crack down on those employers who do not play by the rules.  The article quotes Niezgodski as saying:

"Since these employers are not paying their fair share of taxes, that burden is being unfairly shifted to businesses that do pay their obligations, and the taxpayers of Indiana.  At a time when schools are being asked to cut $300 million from their budgets, shouldn't we be looking to make sure everyone is paying their fair share first?"

Earlier this year Indiana passed legislation which requires the Department of Labor to specifically define what changes are needed to state laws which will help eliminate worker misclassification.  These rules are due to be implemented by August 2011.  Hopefully, the specific changes to Indiana laws to protect whistleblowers and penalize those who commit misclassification will follow.