Recent news from America's heartland brings promising results for state-led worker misclassification enforcement. Since launching their dedicated misclassification unit in September of 2009, Iowa, the Hawkeye State, discovered:
- 116 employers misclassified 887 workers as independent contractors
- Total unreported wages were $15,520,738
- Total unemployment taxes due are $555,647
- Total unemployment penalties and interest due are $156,248.
Collaborative efforts between unemployment insurance, contractor registration and workers’ compensation have aided the investigative efforts of Iowa’s misclassification activities. Another key element of the early success in Iowa has been the tip site where individuals (misclassified workers or the business competitors of alleged violators) can merrily report suspected abuse. This initiative proves that the states do not need changes in independent contractor legislation or even the rules for classifying a contractor versus employee in order to crack down on the problem and harvest some of that missing tax revenue. Existing 1099 laws already on the books can serve if state agencies can simply focus on the issue and set up appropriate systems. The workforce division is just warming up and is still relatively new.
This year, Iowa businesses face an average increase of 19 percent in unemployment insurance taxes, a change actually seen across many states as the recession has taken its toll. The rate increase, triggered by state law, is designed to keep Iowa's trust fund solvent at a time when many state funds have gone bankrupt. In December, Iowa had 110,800 workers who were unemployed. By recouping missing unemployment funds from misclassified workers, the state can improve the overall situation . . . although it may be too little, too late.
“Employers that improperly classify their workers as independent contractors create an unfair playing field by lowering their costs of doing business in comparison to employers who follow the law in Iowa,” stated Iowa Workforce Development Director Elisabeth Buck. “Additionally, misclassified workers are denied access to workers’ compensation coverage and unemployment benefits if needed, creating the potential for a greater economic burden to communities.”
Iowa may be the safest state to live in, but with these new developments, it certainly isn't the safest state to misclassify employees as independent contractors. I think the new compliance environment brings a whole new meaning to the moniker, Hawkeye State.
Do you do business in a state with a worker misclassification task force?
Would you even know it if you are?
Are you familiar with the independent contractor test for your state? Have you done a contractor risk assessment for your business?
Leave a note in the comments if you have questions about this or other state level independent contractor compliance initiatives.
Interesting!! I never considered it that way. I came across this site as of late which I suppose it will be an incredible utilization of new plans and informations.
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