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Worker classification: What are the most common industries for misclassification?

It's no secret that employers sometimes misclassify workers.

Sometimes this happens because the law lacks clear guidelines on the difference between contractors and employees. In other cases, it happens because employers made deliberate decisions to misclassify employees as independent contractors - perhaps to save on payroll taxes and other related costs.

What are some of the most common industries in which misclassification occurs? In this post, we will address that question.

Nature of the problem

There is nothing wrong in itself with employers using contractors. It can be an important strategy for a company to effectively manage its resources, using contractors, temp agencies and various vendors to keep costs down and compete effectively in the marketplace.

In addition, the rise of the sharing economy means more and more people work with (if not for) services such as Lyft and Uber), which view themselves not as employers but as payment platforms. It's also true that many people prefer to work as contractors in today's economy because of the freedom and flexibility associated with it.

That said, misclassifying employees as contractors results in real problems. Misclassified workers don't get the benefits and protections they should. This does not only include wage-and-hour protections, such as minimum wage and overtime). It also includes family and medical leave rights, unemployment insurance and other things.

The situation in Texas

The federal Department of Labor (DOL), the IRS and state agencies around the country are very concerned about all of the misclassification going on.

The Wage and Hour Division (WHD) of the DOL has therefore begun a misclassification initiative that is national in scope. In Fiscal Year 2015, it resulted in back wage claims totaling more than $74 million for more than 102,000 workers.

In Texas, the WHD has an agreement with the Texas Workforce Commission to work together to facilitate compliance with employee classification standards. The agreement began last year and runs through 2018.

Which industries?

Misclassification has long been associated with the construction industry. This is especially true in Texas, where the presence of many undocumented workers tends to result in problematic compliance with labor laws.

But there are several other industries where misclassification is common. According to the DOL, these industries include:

  • Janitorial services
  • Food service
  • Day care
  • Garment production

DOL also believes misclassification is common in temporary services and in the hospitality industry. "Hospitality" is a broad term, encompassing hotels and motels as well as other jobs in transportation and tourism.

Your Situation

If you believe your job has been misclassified, you don't have to passively accept that. It makes sense to talk over your situation with a knowledgeable employment lawyer.

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