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Behind the News: Nebraska Jumps on the IC Misclassification BandwagonCWS 30 April 2.8

Contingent Workforce Strategies 30

The saga on independent contractor misclassification continues. Nebraska follows three dozen other states that have cracked down on companies that try to trim payroll costs by illegally classifying workers as contractors. In mid-April the state's governor, Dave Heineman, signed into law a bill making it illegal for employers to improperly classify workers as contractors.

The new law in particular takes aim at employers in the construction and delivery businesses that misclassify workers, and would fine employers $500 per misclassified individual for the first offense, then $5,000 fine per each misclassified individual for the second and subsequent offenses. This fine is on top of the penalties and back taxes that the company owes the state and federal government.

The Teamsters Union praised the law, saying misclassification costs the state between $9 million and $18 million a year in potential tax revenue. Jim Sheard, secretary- treasurer of Local 554 in Omaha, said the Teamsters fought for nearly two years to get this bill passed. The organization said employers can save up 30 percent in payroll costs and gain an unfair advantage by misclassifying their workers as independent contractors.

Allegations of employee misclassification could be made by calling a phone hotline and accessing a Web site overseen by the state Department of Labor. The measure came from Sen. Steve Lathrop (D-Omaha).

Gov. Heineman's spokeswoman says he had been opposed to a previous version because of tax-increase implications. Each year, more than $4.7 billion in federal income and employment tax revenue is lost due to misclassification and billions more are lost at the state level.

On the other side, workers misclassified as independent contractors receive no protection from workplace health and safety laws, have no legal rights to equal opportunity in the workplace, and no rights to job-protected family and medical leave.


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