Employee misclassification happens when an employee is classified by their employer as an independent contractor. Blumenthal's legislation has the backing of labor unions and the construction industry, who view employee misclassification as harmful to workers. The practice is sometimes used by employers to avoid unemployment compensation, avoid paying taxes, or as a way to underbid their competitors.
According to Blumenthal, "A crackdown on misclassification is long overdue because it does devastating harm to taxpayers, workers and honest businesses. Calling workers independent contractors when they are really employees costs workers benefits, taxpayers revenue and other businesses a fair opportunity to compete for work."
Sources said that tens of thousands of employers misclassify employees as independent contractors, depriving them of minimum wage, overtime, unemployment insurance, and workers' compensation, and leaving them unprotected by health & safety and anti-discrimination laws.
Donald Shubert, President of the Connecticut Construction Industries Association, said the negative impact of payroll fraud arising from employee misclassification is amplified in the present difficult economy, and that law-abiding employers shouldn't be disadvantaged because of the illegal actions of their competitors.
Other supporters of the legislation, calling on the federal government to also support the bill, have commented on Connecticut's positive track record with regard to labor, employer, and bi-partisan support for efforts to improve law enforcement.
Employee misclassification takes place not only in the construction industry, and is more common than many would think. And it isn't necessarily the result of an employer taking advantage of employees. Because the federal and state wage laws governing employee classification are many and sometimes difficult to understand, employers sometimes accidentally misclassify their employees.
Whether misclassification is the result of fraud or simple mistake, though, employees are entitled to pursue lost earned wages.
Source: Norwalk Plus, "Blumenthal works to end misclassification of workers," 26 April 2011.