After a report was published by Cornell University saying approximately 704,000 workers in New York are misclassified as independent contractors, Governor Spitzer has promised to focus on identifiying and classifying workers correctly. The state loses out on unemployment insurance taxes and workers’ compensation premiums. Workers miss out on benefits and sometimes earning even minimum wage.
Under the state’s definition, independent contractors are not employees but are considered to be in business for themselves; employees are those hired to accomplish specific tasks as employers closely supervise their work and decide the hours, pace, place and nature of their labor.
When workers are classified as independent contractors, employers do not have to pay unemployment insurance taxes, workers’ compensation premiums or the employer’s portion of Social Security and Medicare taxes — typically 7.65 percent of wages. In addition, independent contractors do not have a right to unionize and are exempt from minimum wage and overtime protections, as well as from most discrimination and occupational safety laws. They also do not usually receive the health and pension benefits that other workers receive.
The construction industry seems to be the biggest violator of worker misclassification. Cornell believes that up to 15 percent of construction workers are misclassified.