Pa. Labor and Industry makes recommendations to fight worker misclassification

Employee misclassification continues to be a problem in Pennsylvania, but the Pennsylvania Department of Labor and Industry has released a report on recommendations to fight the problem. 

The Joint Task Force on Misclassification of Employees, which includes representatives of business, labor and government has submitted a final report, which contains 15 unanimous recommendations. 

Misclassification of employees occurs when a business wrongfully classifies a worker as an independent contractor when the nature, type, and oversight of their work determines they should be considered an employee under the law. 

Among the recommendations are to expand Act 72, the Construction Workplace Misclassification Act, beyond the construction trades to cover other industries in the commonwealth. 

Also, it recommended that the state adopt a single, multi-factor test for the commonwealth to clearly delineate the difference between “employee” and “independent contractor.” 

“Misclassification harms everyone except the lawbreakers. Misclassified workers are denied the protections and benefits to which the nature of their work entitles them. Law-abiding businesses lose out on business and contracts to unscrupulous businesses engaged in knowing and rampant misclassification. Taxpayers suffer because misclassification deprives the Unemployment Compensation Trust Fund and General Fund of revenue, which results in higher tax rates for everyone,” L&I Secretary Jennifer Berrier said. “I urge the General Assembly to act on the Joint Task Force’s recommendations to address this glaring problem.” 

The recommendations also call for giving L&I the authority to issue administrative stop-work orders against entities or individuals that have been found to have employed misclassified workers, and to provide L&I with statutory authority to debar companies or individuals for knowing violations or for multiple violations of Act 72. 

The Joint Task Force report estimates that there are currently 48,939 employers in Pennsylvania that misclassify at least one employee annually and 259,000 Pennsylvania workers are misclassified annually. 

It estimates that worker misclassification costs $91 million in lost revenue to the unemployment compensation trust fund and between $6.4 and $124.5 million in revenue to the general fund in 2019. 

 “This Task Force has worked to find and expand common ground upon which to build reasonable solutions for addressing these issues and concerns by being accessible, informative, and responsive. Addressing the consequences of worker misclassification is important and, at the end of the day, this issue is about fairness: fairness to workers, fairness to law-abiding businesses, and fairness to working families,” said Basil Merenda, chair of the Joint Task Force and L&I’s deputy secretary for Safety and Labor Relations Management. “I want to thank the members of the task force for their diligent work in thinking outside the box to develop these unanimously approved recommendations, and I urge the General Assembly to strongly consider enacting all 15 into law.” 

Read the entire report here.