Is job misclassification a real problem?

The workforce, especially now, has become complicated. Gig and contractor work has become increasingly popular, and for employers, properly determining how employees are classified is increasingly important. This is because job misclassification is legally actionable and can be extremely costly for business owners.

An example of job misclassification

A number of years in the past, some construction workers in another state were notified that they were no longer employees. Instead, they were being reclassified as members of their employer’s limited liability corporation. For the construction company, this meant they could avoid paying thousands in payroll taxes and avoided the need to follow the federal and state wage and safety laws they had too previously. This seemed like a win for the company, but a federal investigation found otherwise. Specifically, the federal government found that the company illegally committed job misclassification, and they made the company pay over $700,000 in penalties and back wages to over 1,000 workers.

Is job misclassification a real thing?

Yes. According to studies, job misclassification affects thousands, if not hundreds of thousands, of workers every year in all industries across the U.S. In the construction industry alone, a report by the Institute for Construction Economic Research in January found that over 12,000 construction workers in Nevada were likely misclassified in 2018. This represents almost 12 percent of that industries workforce. This cost that state $50 million in revenue in 2018, which is a huge potential legal liability for those employers.

For San Diego, California, businesses, job misclassification can represent a huge potential legal liability. This is why it is so important to contact an attorney early to ensure that how a business owner decided to classify their employees is appropriate. This will ensure that business owners can avoid millions in penalties, legal fees and lost goodwill with the public.