Obama’s FY 2014 Budget and Misclassification

If you recall, our agency had written a blog focused on the misclassification of independent contractors and workers compensation. This week, we have some news regarding misclassification and the President’s FY 2014 budget.

Recently, President Obama released his FY 2014 budget. Within, it includes a request that Congress continues to fund the federal government’s intensifying efforts to combat employee “misclassification” . It states on page 126:

“When employees are misclassified as independent contractors, they are deprived of benefits and protections to which they are legally entitled, such as minimum wage, overtime, unemployment insurance, and anti-discrimination protections. Misclassification, together with the underreporting of cash income for those paid as independent contractors, also costs taxpayers money in lost funds for the Treasury and in Social Security, Medicare, the Unemployment Trust Fund, and State programs. The Budget includes approximately $14 million to combat misclassification, including $10 million for grants to States to identify misclassification and recover unpaid taxes and $4 million for personnel at WHD to investigate misclassification.”

The interesting part of this: These funding levels are the SAME as seen in the President’s FY 2013 budget. $10 million in state grants are given out by the U.S. Department of Labor as an incentive for states to RECLASSIFY independent contractors as employees. Page 25 of the Department of Labor’s FY 2014 budget, goes into detail – please read on!

To summarize, it states that “this initiative will provide a “high performance bonus” to the States most successful at detecting and prosecuting employers that fail to pay their proper share of UI taxes due to worker misclassification and other illegal tax schemes that deny the Federal and State UI Trust Funds hundreds of millions of dollars annually.”

In conclusion, the President’s budget shows that the executive branch of the federal government remains focused on combating “misclassification.” If your company utilizes the services of independent contractors, you must adhere to contractual and operating procedures which best protect independent-contractor status.

At Wolpert Insurance, we want to keep you “in the know” when it comes to big news stories – especially when the news affects your Massachusetts workers compensation. Always remember to come back for more news in the industry!