Employee misclassification allows a company to undercut ethical contractors who are following the letter of the law. Misclassification is the practice of designating an employee as a “1099 worker,” or an independent contractor, when, by law, that person should be compensated as an employee. Another way to misclassify employees is too designate an employee to a category that pays less than the rate they should be paid, according to their job specifications.

A misclassification can result in potentially significant civil penalties. Further, if the misclassification is determined to be intentional, the employer may face criminal prosecution.

Intentional misclassification may be done in an attempt to avoid payroll taxes, unemployment taxes and workers’ compensation insurance. In the construction industry, this practice may also allow a company to submit lower bids for projects and undercut ethical contractors who are following the letter of the law.

The Indiana State Building and Construction Trades Council and our affiliates work to identify contractors who they believe are skirting law, especially on public taxpayer-funded projects. We investigate public records and then contact the local, state or federal agency to bring a case against that contractor. We also lobby at the state and national levels to update laws that pertain to misclassification and violations of Davis-Bacon in order to create a level playing field for our contractors – employers that follow the law and fairly compensate their employees.

Education is another key component to stopping these practices as the unscrupulous contractor often targets underprivileged and/or undocumented communities as well as those who have a language barrier and entice them to work for slave wages. This often leads to accidents and injuries due to lack of training that these men and women feel they cannot report. They are often also not paid health care benefits and go untreated.