Worker Misclassification - How Employee Misclassification Impacts You
Misclassification has a serious adverse impact on not only the misclassified employees, but also on businesses and the general public.
The employees are harmed because they are not covered by the state and federal laws designed to protect workers, laws such as Workers’ Compensation, Unemployment Insurance, minimum wage and overtime, workplace discrimination, Family and Medical Leave, and Occupational Safety and Health. In addition, these workers do not have access to employer-provided health insurance, retirement plans, vacation and sick leave, or other employee benefits typically offered in the workplace.
Businesses that misclassify workers harm law-abiding businesses in at least two ways. First, employers who properly classify their employees face a competitive disadvantage when bidding against misclassifying companies. Second, these employers who properly classify employees often subsidize certain costs of the misclassifying businesses, often paying higher workers’ compensation premiums and unemployment insurance taxes to subsidize misclassifying employers.
Shifts Costs on All of Us
The general public is harmed by misclassification through “cost shifting”. When a misclassified worker injured on the job needs medical care but is not covered by workers’ compensation or health insurance, hospitals and doctors recoup these uninsured expenses by increasing the cost of care, resulting in higher health care costs for all, and generally, higher health insurance premiums. Misclassified employees who become unemployed and are not covered by unemployment create a greater demand for public assistance, in turn increasing taxes at all levels of government. The general public is also harmed by lost taxes, which must be made up by law abiding taxpayers, and insurance premiums, made up by law abiding employers.