Iowa ‘worker misclassification’ focus intensifies

A state crackdown on companies avoiding taxes by listing employees as independent contractors is expected to show even more success when the second quarterly report is issued next week.

Gov. Chet Culver created a task force about one year ago to look into the growing “misclassified workers' problem.” A team of Iowa Workforce Development employees began putting extra emphasis on the problem shortly after the state fiscal year began last July. In its first quarterly report on Nov. 10, Iowa Workforce Development said it had found 45 employers who had wrongly classified some of their own employees as independent contractors. These employers had underreported wages by $2.6 million, about $14,725 per worker. As a result, employers owed $112,253 in unemployment taxes and $24,246 in penalties and interest.

The team initially looked into areas with the largest population and the greatest number of existing complaints, said Kerry Koonce, department spokeswoman. The next quarter's findings, to be reported Feb. 11, will “stretch farther and broader,” she said.

The initial findings showed the gravity of the problem, Koonce said. The construction industry had the largest number of companies identified in the report at 21.

The next report is expected to show that the high initial findings were not a fluke.

“You'll see when the new numbers come out it's significantly higher,” Koonce said.

The department said it doesn't know whether companies misunderstand the law or are deliberately flaunting it. Iowa Workforce Development has been conducting seminars to bring employers up to speed on the law so they can stay out of trouble.

The effort is being warmly greeted by legitimate contractors, according to Dave Hogan, a business representative for Carpenters Local 308 in Cedar Rapids.

Hogan said contractors his union's members work for overwhelmingly meet their legal obligations and properly classify workers. At a time when competition for work is intense, he said contractors can be underbid by those who thwart the law.

Only one Linn County business was tagged in the first quarterly report. The effort also tagged six businesses in Cedar County, but most were in central Iowa. The businesses were not identified. Hogan expects more Eastern Iowa companies to be tagged as the scope of the effort broadens.