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Joint Task Force on Misclassification of Employees – Pennsylvania Department of Labor & Industry

Pennsylvania’s Joint Task Force on Misclassification of Employees (“Task Force”) held its fourth meeting of the year on April 22, 2022, the first in-person meeting since its assembly in January 2021. The Task Force is a bipartisan group of nominated volunteers representing business, labor, and government seeking to publicize a comprehensive understanding of worker misclassification and its consequences. This meeting occurred a month after the Task Force released its Annual Report, which outlined 15 unanimous recommendations to tackle employee misclassification. The Task Force plans to submit its final report in December 2022.

Employee misclassification occurs when an employer wrongfully categorizes a worker as an independent contractor despite legal factors, including the nature, type, and oversight requirements of the work, that are determinative of employee status.[1] Many companies hire workers as independent contractors rather than employees to avoid paying employee benefits, among other expenses. But this practice is especially costly for workers, who lose out on wages, benefits, unemployment compensation claims, and much more. Cost also shifts onto law-abiding businesses, who are forced to compete with employers who violate labor laws to cut corners and costs. In fact, it is estimated that employee misclassification costs state governments and taxpayers tens of millions of dollars every year.[2]

Deputy Secretary for Safety and Labor-Management Relations and Chairman of the Task Force, Basil Merenda, began the meeting with a debrief of a multi-State conference on employee misclassification and related labor issues. Discussion focused on Montana’s method for determining whether a worker is an employee or independent contractor using an “AB Test” with a standard employer assumption, rather than the widely used “ABC Test.” Under Montana’s approach, the employment relationship is determined at the hiring stage, and companies must receive an independent contractor exemption certificate in order to hire such workers. The Task Force considered adopting this approach in Pennsylvania and stated that representatives from Montana would present at the next meeting.

The task force also invited workers to share their experiences being misclassified as independent contractors. One worker, a painter in the local contracting industry, recalled how he was misled to believe he was an employee of the company he worked for but ended up receiving a form 1099, a tax form for independent contractors, at the end of the year. According to this worker, “[t]he small business arena is an easy place for misclassification to occur.”

Another worker recounted how misclassification has resulted in “the battle of [her] life right now.” Karen was a custodian at her church for six years and claims she was an employee in every aspect. However, despite the church having control over her work schedule, pay, and tasks, she was classified as an independent contractor with no rights to employee benefits or paid time off. Karen stated that she wants the Task Force and others to know the devastation that misclassification has caused for people like her.

The legal team at Miller Shah LLP has significant experience representing employee misclassification matters. If you have any questions regarding this subject or this post, please contact Chiharu Sekino (cgsekino@millershah.com). The firm can also be reached toll-free at (866) 540-5505.

Miller Shah LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, and Pennsylvania. The firm is an active member of International Advisory Group (www.iaginternational.org), which provides clients access to excellent legal and accounting resources around the globe. For more information about the firm, please visit https://www.millershah.com.

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