Interagency Task Force on Employ

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Interagency Task Force on Employ Powered By Docstoc

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

                 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

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

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).

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 &

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

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


 • 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

Overview of Governor Granholm’s Charge
To The Task Force

 1. Examine and evaluate existing employee
    misclassification enforcement and recommend

 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

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

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
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
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
 • Cause employers who “play by the rules” to pay higher
   unemployment taxes as less taxes go into the
   unemployment insurance trust fund

Why is Employee Misclassification Harmful?

Taxpayers lose because:
• Less unemployment taxes are collected to pay
  unemployment benefits, as taxable wages are
• 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

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?

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:
 To report suspected employee misclassification, call our toll-free hotline: