A recent court case (“Scarborough roofing contractor found not guilty in death of worker,” Dec. 9) has raised the issue of worker classification. We, along with Maine State Chamber of Commerce President Dana Connors and Maine AFL-CIO President Cynthia Phinney, are writing to explain why the proper classification of workers is so important.
When an individual or business hires another person to perform work for them, that person will either be an employee or an independent contractor. Misclassification occurs when an employer hires an employee but treats them like an independent contractor.
Why does it matter if an employer treats an employee like an independent contractor? There are several important reasons.
• Independent contractors who do not purchase workers’ compensation insurance do not have access to lost wages and medical benefits under the Workers’ Compensation Act if they are injured on the job. An employee misclassified as an independent contractor can file a claim with the Workers’ Compensation Board. However, in addition to showing they were hurt at work, the misclassified employee will also have to prove they were an employee. This almost always means the injured employee’s claim will take longer to resolve.
In the meantime, and maybe permanently if the employer does not have workers’ compensation insurance, an injured misclassified employee will have to find a way to pay for the medical treatment they need. If the injury is serious, they may have to do this without any income.
• Similarly, if a misclassified worker loses their job through no fault of their own and files for unemployment insurance, it will take longer for the employee’s unemployment claim to be resolved.
• Employers that misclassify employees as independent contractors are probably not following federal and state employment laws that regulate minimum wages, overtime, paid leave and safety, among other protections. Misclassified employees may receive less pay than they are entitled to and work in conditions that are not as safe as they should be.
• Misclassification also adversely affects other employers. Employers that properly classify their workers – as the vast majority do – will find themselves at a disadvantage when bidding for jobs or otherwise competing against employers that do not. Employers that follow the law may also pay higher workers’ compensation rates if the pool of workers they are insuring is smaller because their competitors have misclassified their employees.
All this affects taxpayers. A misclassified employee who is injured on the job may need publicly funded medical and living assistance because of the injury. If workers’ compensation insurance is not available to cover medical costs and living expenses, then local, state and federal programs may have to step in to cover these expenses. Delays in receiving or not knowing to apply for unemployment compensation, or not being aware that they are entitled to minimum wage, overtime and other protections, might also force workers to rely on public support.
Because misclassification is such an important issue, the Department of Labor and the Workers’ Compensation Board work together to prevent misclassification by enforcing laws that protect workers and punish misclassification. The penalties for misclassification can be severe:
The Workers’ Compensation Board can impose a fine that can exceed the cost of insurance premiums that should have been paid. If the violation is intentional, the employer can face potential revocation of authority to do business in Maine and may also be subject to prosecution of a Class D crime.
The Maine Department of Labor can impose heavy penalties and, in addition to those penalties, the misclassifying employer would be required to pay retroactive unemployment taxes and back wages.
The proper classification of workers is a vital foundation of Maine’s economy. Business organizations, labor unions and state agencies will continue to work to ensure that everyone is playing by the same rules: that workers receive the protections they are entitled to and that employers can compete on a level playing field. At the end of the day, the only one who benefits from misclassification is the bad actor doing it. The hardworking people and law-abiding businesses of Maine are left to pay the hidden costs of worker misclassification.
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