Galloway to introduce plan to thwart employee misclassification
Plan could help 11,000 workers, save up to $124.5 million annually for Pennsylvania
HARRISBURG, March 9 – State Rep. John Galloway, D-Bucks, today announced that he is working with his colleagues to introduce 15 recommendations contained in the Joint Task Force on Employee Misclassification’s preliminary report to the General Assembly released earlier this month.
The Joint Task Force created by Act 85 of 2020 and championed by Galloway studied the issue of worker misclassification and its impact on Pennsylvania. Misclassification of employees occurs when a business wrongfully classifies a worker as an independent contractor even though the nature, type and oversight of their work determines they should be considered an employee under the law. Misclassification can impact industries from home health care to construction to online businesses, like Uber and Lyft drivers.
“I fought to have my bill enacted because I was sick of seeing how employee misclassification was hurting Pennsylvania,” Galloway said. “I knew the legislature could level the playing field by preventing honest, hardworking Pennsylvanians from being wrongly classified as independent contractors and suffering from lost wages, medical bills and lack of unemployment compensation; law-abiding businesses from struggling with the impact of lost profits and competitive bids; and the taxpayer and state government from losing out on rightfully owed revenue that could be used to improve services and infrastructure.
“Criminals use employee misclassification to get rich in Pennsylvania at the expense of the financially vulnerable and the law abiding,” Galloway said. “I hope the legislature will adopt the proposals to end this unfair and unethical practice, which is currently bleeding the state dry so that we can build a better Pennsylvania with better jobs, better roads, better bridges and better infrastructure for everyone.”
The Joint Task Force annual report estimates:
- 7.9: Average number of misclassified employees found per Office of Unemployment Compensation Tax Services audit.
- 11,670: Estimated number of misclassified employees who suffered injury or illness at work and were denied Workers’ Compensation in 2020.
- 49,266: Annual number of employers who currently misclassify at least one employee.
- 389,000: Annual number of misclassified employees in Pennsylvania.
- $440,780: Estimated losses to the Uninsured Employers Guarantee Fund due to misclassification in 2020.
- $131 million: Annual lost revenue to UC Trust Fund due to misclassification.
- $6.4 million to $124.5 million: Estimated range of lost revenue to General Fund due to misclassification in tax year 2019.
- $176.3 million: Estimated losses to misclassified employees who suffered injury or illness at work in 2020 without workers’ compensation insurance.
The report included 15 recommendations that were unanimously agreed upon. They include, but are not limited to:
- Extending Act 72, the Construction Workplace Misclassification Act, beyond the construction trades to cover other industries in the commonwealth.
- Expanding statewide clearance programs to require all state agencies to pull current licenses or not renew current licenses if a business is determined to have knowingly misclassified workers and has not paid the fines and fees associated with that violation or previous violations.
- Enhancing the penalties associated with worker misclassification violations under Act 72 by increasing the fines in tiers for first, second and subsequent violations, and by enhancing criminal penalties for known violations while maintaining summary offenses for negligent violations.
Residents can review all 15 task force recommendations by reading the Joint Task Force on Employee Misclassification’s report at this link: https://www.pahouse.com/files/Documents/2022-03-08_031751__Act%2085%20Annual%20Report%202022.pdf.