Misclassification of Employees as Independent Contractors
The misclassification of workers as independent contractors rather than employees is a serious problem in Rhode Island and across the country.
When employers misclassify workers
- They avoid paying many state and federal taxes.
- They avoid providing workers compensation coverage for their employees.
- They may fail to follow wage, contractor registration or other labor laws.
- They have a competitive advantage and may underprice legitimate employers.
The Federal Government Accountability Office reports that the underpayment of unemployment, Social Security, income taxes, and workers' compensation are exceeding billions of dollars federally and millions of dollars at the state level.
Rhode Island employers must generally withhold state and federal income taxes, Social Security and Medicare taxes, and pay unemployment taxes on wages paid to employees. They must also pay Workers' Compensation premiums on the employees.
An employee is anyone performing service for an employer who controls what will be done and how it will be done by the worker.
Independent Contractors have an independent trade, business or profession. Their services are offered to the public and they have the right to control the means and methods of how the work is performed.If an employer retains the right to control what will be done and how it will be done, the individual is likely performing services as an employee.
- Worker Misclassification Fact Sheet
- Am I an Employee?: Employment Relationship Under the Fair Labor Standards Act Fact Sheet (US DOL)
About the Task Force
Article 8 of the FY15 state budget established the Task Force on the Underground Economy and Employee Misclassification to enhance collaboration between government agencies focused on protecting Rhode Island’s workforce and ensuring a level playing field for businesses in our state.
The task force is charged with:
- Fostering voluntary compliance with the law by educating business owners and the workforce about properly classifying workers and applicable requirements;
- Protecting the health, safety and benefit rights of workers, and
- Restoring competitive equality for law-abiding businesses.
The task force Task Force has representation from:
- Dept. of Labor and Training
- Division of Taxation
- Dept. of Business Regulation
- Division of Workforce Regulation and Safety
- RI Attorney General
- RI Dept. of Public Safety
- Workers’ Compensation Court
Worker Missclassification Quiz
Disclaimer: This online quiz may help provide a work relationship evaluation based on the your answers. It is not an official employment or non-employment determination, but a helpful tool when trying to determine whether a worker(s) is/are misclassified.
Each reported misclassification is investigated on a case-by-case basis. The following questions may help you decide whether or not to report your case.
The Rhode Island Task Force follows the Internal Revenue Service (IRS) Guidelines when determining if workers are considered Independent Contractors. Visit the IRS website for more information on Independent Contractors.
Under common law rules, an employer-employee relationship exists when the business for which the services are performed has the right to direct and control the worker who performs the services. This control refers not only to the result to be accomplished by the work, but also the means and details by which that result is accomplished. Three major categories should be considered when determining the correct classification of a worker. These are behavioral control, financial control, and the relationship of the parties.
*Relevant evidence in all three categories must be weighed to determine the worker's status.*
- 2018 Worker Misclassification Annual Report
- 2017 Worker Misclassification Annual Report
- 2016 Worker Misclassification Annual Report
- Worker Misclassification Fact Sheet
- Am I an Employee?: Employment Relationship Under the Fair Labor Standards Act (US DOL)
- 2015 Worker Misclassification Annual Report
- Connecticut Joint Enforcement Commission for Worker Misclassification
- Maine Worker Misclassification
- Massachusetts Joint Task Force on the Underground Economy and Employee Misclassification
- New Hampshire Task Force on the Misclassification of NH Workers
- Vermont Misclassification
- New York Employer Misclassification of Workers
- US Dept. of Labor Misclassification