While corporate profits and the Dow Jones have reached record highs, wages and security for workers are trending in the opposite direction.
Increasingly sophisticated corporate bookkeeping has created two disparate economies: one for corporations and one for American workers.
Lawmakers who worry about the shrinking middle class are wise to replace strong rhetoric with a diligent, piece-by-piece dismantling of the barriers that are keeping working families from participating in the economic recovery.
One of these pieces is Pennsylvania’s Act 72 of 2010, a law targeting the misclassification of workers by their employers as independent contractors, which provides benefits to employers by taking them away from workers.
While there is certainly room in the economy for these so-called “independent contractors,” there is obvious abuse of the classification which denies employees rights, benefits and protections accorded under labor laws.
Act 72 ensures that independent contractors are indeed independent, using their own tools and equipment free of the direct supervision of their employer. The law outlines requirements for this classification and penalties for abuse.
A law isn’t effective, however, unless someone is enforcing it and, although in effect for more than three years, Pennsylvania’s Dept. of Labor & Industry isn’t getting the job done.
Labor & Industry has not taken action to prosecute or dismiss 18 of the original 29 complaints filed in 2011. Of the 63 complaints filed within the last three years, only 20 were closed.
Northampton Co. District Attorney John Morganelli, who has met with department officials to discuss the enforcement of Act 72, has expressed his frustration at the lack of action by state regulators.
I have introduced legislation (SB 1454) that would help local district attorneys to enforce Act 72 where they suspect local violations. Under the bill, the State would reimburse district attorneys for the cost of their Act 72 investigations.
It is time to acknowledge that, for whatever reason – lack of expertise or political indifference — state regulators aren’t up to the job and new eyes on the cases and shoes on the street are needed.
Continuing to allow the flouting of the law is hurting middle-class working families and it’s not helping the employers that continue the practice. State regulators, individual workers and their families are not the only ones interested in fair employment policy.
Every taxpayer loses when misclassification results in uncollected income taxes, workers compensation payments and unpaid medical bills.
Through lack of enforcement, the state is hurting employers as well, since dependence on this practice could lead down the road to serious trouble with the federal Dept. of Labor and the Internal Revenue Service.
In cooperation with labor officials in a dozen other states, the federal government has recovered more than $18 million in wages for nearly 20,000 misclassified workers over the past two years. In Pennsylvania, the amount recovered has been less than $5,000.
These two federal enforcement agencies are now working together to crack down on employee misclassification and the employer who has built a business model around the practice is putting the business – and those who depend on it – at risk. And that risk goes beyond financial. Some employers are facing federal criminal penalties for cheating workers and the government through misclassification.
By allowing local district attorneys to use their local knowledge to end this misguided practice, we can advance the recovery of the middle class, improve local economies, ensure fair taxation and prevent business owners from potential criminal liability.