Independent contracting breaks laws, hurts workers

Imagine your boss calls you into his office today and says, “From this day forward, the company is classifying you as an independent contractor. We're going to save a bunch of money on you, and you're now your own boss.” Your own boss! Think of the freedom.

The only drawback is that fair wage and hours laws no longer protect you, and if you want to keep earning your pay, you still have to do whatever that old boss tells you. Also, your benefits disappear. You don't have employer-provided health insurance, so you're on the hook for all your medical bills. If you get hurt at work - tough. You don't have workers' compensation insurance. If your employment ends abruptly, you can't access unemployment funds.

And the kicker: That old boss of yours no longer pays payroll taxes on your wages, so the IRS now takes twice as much of your money.

Doesn't sound very fair, does it? It's called 1099 worker misclassification. It's tax fraud. It's illegal, and it happens every day in Iowa.

This problem is most often associated with construction workers and the building trades. Contractors can successfully underbid their competitors by paying their workers as independent contractors and avoiding taxes and worker benefits.

This puts law-abiding contractors at a competitive disadvantage, and cheats state government out of desperately needed revenue. More so, it puts workers in serious financial danger.

Workers from a variety of sectors have reported similar abuses. A recent investigation by Iowa Workforce Development showed nearly 120 Iowa companies have been exposed for misclassifying workers. They were ordered to pay back taxes and late penalties to the tune of $712,000.

Iowa Workforce Development will continue to investigate cheaters for similar offenses, thanks to a governor's task force that secured agency funding for the issue.

This recovers taxes from the tax cheats. But it does little for the misclassified worker who clocked in every day for less pay and with the fear of facing financial ruin if seriously injured on the job. It does little for the honest Iowa contractor whose company lost jobs to a team of “independent contractors.”

Iowa must implement stiffer penalties to deter the practice of misclassifying workers. A hefty fine would influence employers where it matters most, their bottom lines.

Last year, 46 Iowans died from injuries in the workplace and thousands more were hurt.

When Iowa employers misclassify workers, they risk bankrupting hardworking families in the event of layoff, injury or death. That risk is unacceptable.

Bob Rush, a Cedar Rapids attorney, is a former Iowa legislator.