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Interagency Task Force on Employ

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					INTERAGENCY TASK FORCE ON
         EMPLOYEE
     MISCLASSIFICATION

    Jennifer M. Granholm   Keith W. Cooley
    Governor               DLEG Director
                           and Task Force Chair


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                 Executive Order 2008-1
  Interagency Task Force on Employee Misclassification


• Employers sometimes misclassify their workers as
  “independent contractors,” when those individuals are
  really “employees”

• Misclassification allows the employer to avoid legal
  obligations

• Governor Jennifer Granholm created the Interagency
  Task Force on Employee Misclassification, to
  coordinate enforcement across state departments


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What is Employee Misclassification?

 Misclassification most commonly occurs when an employer
  improperly (or maybe innocently) classifies a worker as an
  “independent contractor,” rather than as an “employee”
 The primary difference between an independent contractor
  and an employee is the employer’s “right to control” the
  worker. With an employee, the employer:
   Directs the worker
   Determines what needs to be done (results) and
   Controls how it is to be done (means).

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Interagency Task Force on Employee Misclassification

Task Force Chair:
    Keith Cooley, Director, Dept. of Labor & Economic Growth

Task Force Members:

    Jack Finn, Administrator, Wage & Hour Division

    Jack Nolish, Director, Workers’ Compensation Agency

    Director, Unemployment Insurance Agency

    Doug Schafer, Director, Tax Compliance Bureau, Dept. of Treasury

    Craig Orr, Director, Business Service, Dept. of Management &
     Budget

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Task Force Committees
 • Education / Communication
   Educating the public on the employee misclassification issue and
   maintaining the website.

 • Research
   Researching experiences of misclassification in other states and their
   responses.

 • Legal
    – Reviewing the various Michigan laws defining “employees” and
      recommending possible changes to coordinate the state’s laws and
      rules.
    – Examining the legal issue of sharing confidential information
      between agencies.




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Schedule

 • Task Force Public Meeting
    – Next meeting September 16, 2008
 • Committee Hearings
 • Public Hearings
             June 30     Farmington Hills
             July 10     Benton Harbor
             Sept. 16    Lansing
             Pending     Flint/Saginaw
             Pending     Traverse City
             Pending     Marquette

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Overview of Governor Granholm’s Charge
To The Task Force

 1. Examine and evaluate existing employee
    misclassification enforcement and recommend
    changes

 2. Create a system for sharing information about
    suspected employee misclassification violations
    among Task Force member agencies and other states

 3. Recommend executive or legislative actions needed
    to aid in information sharing



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Overview of Governor Granholm’s Charge
To The Task Force

  4. Cooperative efforts

  • Form interagency enforcement teams to investigate
    significant cases of employee misclassification

  • Work cooperatively with law enforcement agencies,
    including the Internal Revenue Service, and

  • Establish a procedure for referring cases to the
    Attorney General or law enforcement authorities



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Gov. Granholm’s Charge To The Task Force

5. Develop educational programs and information
   sharing with business, labor, community and faith-
   based groups

6. Educate the public about employee misclassification
   and the harm it inflicts

7. Develop procedures to streamline identification and
   reporting of employee misclassification

8. Establish a referral and tip system for the public, such
   as a telephone tip line and a website

9. Issue a report to the Governor each July 1
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Why is Employee Misclassification Harmful?



Workers who are misclassified, may:
• Be ineligible for such payments as unemployment insurance
  and workers’ compensation
• Lose other labor law protections, such as minimum and
  prevailing wage, overtime, health and safety, and family and
  medical leave
• Become liable for funding their full Social Security and
  Medicare taxes and for reporting their own income taxes
• Lose access to employer-based benefits, such as health
  insurance
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Why is Employee Misclassification Harmful?

 Employers who misclassify their workers:
 • Avoid paying income taxes, FICA taxes, unemployment
   taxes and workers’ compensation premiums on workers
   not classified as employees
 • Create an unfair competitive advantage
 • Underbid employers who do not misclassify their
   employees
 • Cause employers who “play by the rules” to pay higher
   unemployment taxes as less taxes go into the
   unemployment insurance trust fund

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Why is Employee Misclassification Harmful?



Taxpayers lose because:
• Less unemployment taxes are collected to pay
  unemployment benefits, as taxable wages are
  underreported
• The social safety net is harmed. GAO estimates that in
  2006, $2.72 billion was underpaid nationally in Social
  Security taxes, UI taxes and income taxes. A recent
  study found that 10% of New York’s workers were
  misclassified

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Economic Reality Test
   Each state agency has its own test to determine if a worker is an
   independent contractor. The following questions are typical of those
   considered in classifying a worker:

 • Does the employer incur liability if the relationship terminates at will?
 • Is work performed an integral part of the employer’s business?
 • Does the worker depend upon the wages from that job for their living?
 • Does the worker furnish equipment and materials?
 • Does the worker hold himself or herself out to the public as able to
   perform the same tasks?
 • Is the work customarily done by an independent contractor?
 • Does the employer have “control” through the payment of wages,
   maintenance of discipline and the right to hire and fire the worker?


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Contact Information
 To submit comments after today’s hearing, mail them to:

      Ms. Joyce K. Surprenant
      Project Coordinator – Employee Misclassification
      Unemployment Insurance Agency
      3024 W. Grand Blvd., Suite 11-600
      Detroit, Michigan 48202
 For more information about employee misclassification, visit our website:
      www.michigan.gov/dleg
 To report suspected employee misclassification, call our toll-free hotline:

      1-800-822-1122

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