Misclassification of Employees as Independent Contractors

The misclassification of employees as independent contractors is one of the most serious problems facing affected workers, employers and the New Hampshire economy.

In recent years, the employment relationship between workers and the businesses receiving the benefit of their labor has weakened as companies contract out or otherwise outsource work to be performed by other business operations. This is accomplished through the use of subcontractors, temporary agencies, labor brokers and third-party management.

This breakdown, or “fissuring,” of the employment relationship can result in the misclassification of employees as independent contractors in a variety of ways, such as employers simply mislabeling certain employees as independent contractors to reduce payroll costs. The use of legitimate independent contractors plays an important role in the New Hampshire economy, but when employers deliberately misclassify employees in an attempt to cut costs, everyone loses.

Misclassified employees often are denied access to critical benefits and protections to which they are entitled, such as the minimum wage, overtime compensation, family and medical leave, unemployment insurance and safe workplaces. The U.S. Department of Labor reports that employee misclassification generates substantial losses to state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds. 

Legislative attempts to weaken regulation of worker misclassification typically focus on relaxing the legal definition of workers who may be appropriately classified as independent contractors, excluding specific occupations from workers’ compensation and wage & hour protections, and requiring individual workers who are sometimes self-employed to register as a business owner with the state.


FOR MORE INFORMATION:

National Employment Law Project, May 2016
Independent Contractor vs. Employee: Why Misclassification Matters and What We Can Do To Stop It

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