Senator Bob Casey of Pennsylvania introduced a bill Tuesday looking to put an end to the misclassification of employees as independent contractors – a common occurrence in fields like cable installation, custodial arts, and construction. Some business owners strapped for cash in a rough economy list employees as “independent contractors” in order to avoid paying overtime, taxes, and insurance coverage. As a result, injured employees are forced to pay out of pocket for workplace injuries.
According to Senator Casey, the effects of misclassification are far-reaching. He estimates that payroll theft has taken billions of dollars out of taxpayers’ pockets. If his legislation goes through, employers who misclassify their employees would face penalties. All employers would be required to let workers know their employment status up front.
What does this legislation mean for your small business? Read on to find out.
Industries Affected by the Workers’ Comp Misclassification Bill
While many small businesses depend on actual contract employees, others may not even realize they could face fines and additional taxes for the workers they currently employ. As a general rule of thumb, if you regulate the time and place that your workers must perform their work or how they must do it, you probably have to classify them as employees – and make the associated Workers’ Compensation Insurance and tax payments.
The following industries are among the most likely to be affected by the misclassification bill, according to sources…
- Janitor, maid, and cleaning services. If the bill passes, owners of cleaning services businesses could have to start classifying nearly all of their employees as full- or part-time workers. Why? Because it’s rare that someone performing cleaning work is able to set their own schedule or perform work according to their own standards. More commonly, professionals must be at a fixed location at a specific time and often have to apply specific techniques or use certain products to complete their work. If you own a cleaning business and currently classify workers as contract employees, this bill could mean more taxes and insurance costs for you.
- Cable installation companies. As with cleaning services providers, cable installers typically must perform work in a specific location at a specific time, meaning that even cable installation employees who don’t have fulltime hours would be unlikely to qualify as contract workers if the new bill becomes law. Because cable installers do work that’s fairly physical, too, Workers’ Compensation premiums for their employers may be considerable. To learn more about Workers' Comp costs, read our Workers' Comp Insurance Quote Analysis.
- Construction and contracting. Legislation involving misclassification of workers has the greatest potential to affect construction employees and independent contractors, largely because of the high cost of Workers’ Comp benefits for a high-risk field like construction. In fact, misclassifying construction workers as independent contractors can reduce the cost of employees by as much as 30 percent. Regardless of the outcome of the bill, owners of construction and contracting businesses should be aware of the importance of carrying Workers’ Compensation for their employees, who face a considerable risk of on-the-job injury every day.