Holiday workers susceptible to wage theft
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Holiday workers in a tight job market may be glad they're not among the 9 percent of American workers who are unemployed, but they are also particularly vulnerable to theft.
Not theft in the employee break room, but rather by their employers.
The National Consumers League is trying to warn workers that they may be misclassified and therefore vulnerable to abuses from employers who don't want to pay them properly.
Employers are, in some cases, calling employees "independent contractors" when they are really regular workers, according to the League. Independent contractors do not need to be paid minimum wage and overtime, and also don't trigger requirements for employers to pay state fees for unemployment compensation and workers compensation.
A 2008 study by the Pennsylvania Department of Labor and Industry that was included in a National Employment Law Project paper about the practice noted that the state estimated 9 percent of Pennsylvania workers, or 580,000 people, were mislabeled as independent contractors when they should have been called "employees."
If accurate, that cost $200 million that would have gone into the state's unemployment compensation trust fund and another $81 million for workers compensation.
Michell McIntyre, project manager for the special project on wage theft at the National Consumer's League, said employees who are independent contractors are issued 1099 forms for tax purposes instead of W-2 forms. Taxes are not withheld from employees who receive 1099s the way they are for the W-2 forms, so come tax time an employee may have to come up with the money to pay the Internal Revenue Service.
"The employers realize that if they classify you as something different, they can keep more money," Ms. McIntyre said.
She said that seasonal workers and construction workers are often classified as independent contractors because they are on the job for such a short time.
There's been a recent push by the federal government against employers using the "independent contractor" designation to get out of paying minimum wage, overtime pay and taxes.
In September, U.S. Secretary of Labor Hilda L. Solis announced the labor department had signed agreements to work with the IRS and seven states to work together to enforce the laws regarding the proper classification of employees.
She said the labor department was also close to signing agreements with five other states. Pennsylvania was not among them.
Under the federal Fair Labor Standards Act that was originally passed by Congress in 1938, workers are entitled to minimum wage and time and a half pay for overtime.
"This sort of employee misclassification is a serious and, according to all available evidence, growing problem," Nancy J. Leppink, the labor department's deputy wage and hour administrator said in testimony before a House subcommittee.
"Misclassification also makes it difficult for law-abiding employers to compete -- and no employer should have to choose between success and obeying the law."
Ms. Leppink said stepped-up enforcement meant that in fiscal 2011, the labor department's Wage and Hour Division collected almost $225 million in back wages for workers shorted by their employers, the highest ever collected.
Ms. McIntyre said wage theft spans all income levels, with engineers and other professionals sometimes being given too much work to complete in 40 hours but then denied overtime.
It also affects lower skilled workers who are classified as contractors even as they are told what to wear, when to arrive and how to do their jobs but denied the minimum wage the law requires. True independent contractors have the autonomy to do their jobs the way they see fit.
First Published November 30, 2011 12:00 am