Public Task Forces Take on Employee Misclassification: Best Practices

[Updated August 2020]

A person’s job is just one part of who that person is, but the work we do shapes our identities and our lives. Work should be a place where we learn, contribute, and connect. In return for our labor, we should have fair pay, ample social benefits, and the right to come together with our coworkers to negotiate for more. A good job enables us to provide for ourselves and our families, and to join with employers and coworkers to ensure that communities thrive together.

For decades, however, too many businesses have chosen not to live up to these values. Corporations have mischaracterized their employees as “independent contractors,” “self-employed,” “partners,” or “freelancers,” or required them to form “limited liability companies”—or simply paid them off the books—as a tactic to shift risk downward onto workers, while channeling wealth upward to investors and CEOs. When they engage in this sham practice, companies shed responsibility for their workers but often maintain strict controls over when, where, how, and for how much money workers perform their jobs. The practice has been especially prevalent in construction, retail, janitorial, home care, trucking, delivery services, transportation, and other low-wage industries where people of color have historically been shunted. More recently, well-capitalized online platform companies have joined the trend. The practice is commonly referred to as “misclassification” or “payroll fraud.” We will use those terms interchangeably in this paper.

Since 2007, more than half the states have formed interagency task forces to take on misclassification. In 2018 and 2019, there was a task force resurgence, with eight new or revitalized task forces.

Workers’ organizations, cities, and states have taken a variety of approaches to address this problem, including passing new laws that assess higher penalties for misclassification, employing more expansive tests to determine whether workers are “employees” or not, or addressing misclassification with sector-specific laws. Over the course of a decade, more than half of the states formed formal or informal interagency task forces to take on companies that abuse their power vis-à-vis their workers by illegally misclassifying them. In 2018 and 2019, especially, there has been a resurgence of task forces, with a total of eight new or revitalized task forces. This report is meant as a guide to legislatures and executives wishing to adopt best practices to hold business accountable and restore rights to dispossessed workers.

Summary of Recommendations

1. Establish the task force through legislation, with a broad mandate and broad participation by state agencies with jurisdiction over employment and tax laws, and enforcement of each. Consider adding an advisory council of business and labor leaders.
2. Ensure that the task force can plan for enforcement, research, auditing, legal, communications, and reporting functions.
3. For efficient use of resources and maximum deterrence value, enable the task force to engage in targeted enforcement, and name a point person at each participating agency.
4. Each agency brings specific competencies and specific powers to the table: make use of all the tools available to the task force.
5. Continually cross-train agency personnel, so they can spot violations of laws enforced by sister agencies; establish within agency operations a routine method for referral of appropriate cases.
6. To streamline investigations, develop materials to support joint activities, including internal tools like checklists, and external tools such as “know your rights” information for workers and employers.
7. Share data between agencies to improve efficiency of enforcement actions.
8. Educate the public about the workings of the task force, and solicit information from affected workers and businesses. Work closely with community organizations to identify lawbreakers.
9. Seek continuous improvement by mandating periodic reports from the task force for review, reflection, and course correction.
10. Extend the reach of the task force and share best practices by working with similar task forces in other states, and with the federal Department of Labor.

Download the policy brief to read more.