Obama’s Budget Targets Misclassification of
Mess Media, February 2, 2010
President Obama’s budget for the 2011 fiscal year (which begins October
1) seeks to limit widespread abuses by employers who misclassify
employees as independent contractors in order to evade their
In a video chat, Labor Department Secretary Hilda Solis noted that a
budget is much more than numbers. It “is an expression of the
department’s priorities.” Solis was clear that one of the Labor
Department’s top priorities will be the independent contractor issue.
As part of the 2011 Budget, the Departments of Labor and Treasury are
pursuing a joint proposal that eliminates incentives in law for
employers to misclassify their employees; enhances the ability of both
agencies to penalize employers who misclassify; and restores
protections to employees who have been denied them because of their
The Labor department would receive about $25 million and 100 additional
enforcement personnel to work in support of a new “multi-agency
initiative to dramatically strengthen and coordinate federal and state
efforts to address employer misclassification of workers. “
Jane Oates, assistant secretary of the Employment and Training
Administration said that “the goal is to improve capacity to identify
misclassification through increased information sharing and targeted
audits in high-risk industry sectors. These efforts will prevent
misclassification, increase statutory enforcement where appropriate,
and enable collection of payroll taxes previously lost due to
misclassification, such as in the Unemployment Insurance program.”
Deputy Administrator of the Wage and Hour Division, Nancy Leppink added
that “the Joint Labor-Treasury Initiative would also address the
failure to pay minimum wage and overtime due to misclassification of
employees.” When employees are misclassified as independent
contractors, they are deprived of benefits and protections to which
they are legally entitled. For example, independent contractors do not
receive overtime and are ineligible to receive unemployment benefits.
Misclassification also has a budgetary impact, reducing receipts in
Treasury and the Social Security, Medicare and Unemployment Insurance
Trust Funds. According to the budget the joint effort would increase
Treasury receipts by more than $7 billion over 10 years.
The budget measures also add support to proposed legislative changes
that close the loophole that allows employers to avoid paying Social
Security and Medicare taxes, withholding income taxes and contributing
to workers’ compensation and unemployment insurance.
The Taxpayer Responsibility, Accountability and Consistency Act of
2009, introduced by Senator John Kerry last December, would eliminate
the “Safe Harbor” provision that allows employers to misclassify
workers as independent contractors for tax purposes without undergoing
the common law test of their status.
"I'm pleased the budget addresses this issue head-on," Kerry said in a
statement. "The best way to level the playing field for America's
workers is by ensuring that they get the protections they deserve and
make an honest day's pay for an honest day's work."
According to the U.S. Department of Labor, as many as 30 percent of all
employers misclassify their employees as independent contractors.
Obama Introduces Independent
Contractor Legislation - Mess Media September 28, 2007