With health care policy in limbo in Washington, the politicians who would like to be Georgia’s next governor are staking out their own policy outlines. Democratic State Rep. Stacey Evans favors expanding Medicaid, but said the state could take other action as well.
We decided to check Evans’ number of misclassified workers, and found she’s on safe ground.
Some businesses avoid treating workers as employees by calling them independent contractors. The person might work only for that one business, use equipment the business provides and do exactly what the business tells him or her to do, and yet be labeled as if the person was in business for himself.
The advantage for companies is they avoid paying a number of employment taxes, including Medicare, Social Security and unemployment insurance. If they offer health insurance, they would sidestep that too.
Georgia’s Department of Labor says, “Independent contractor status depends on the underlying nature of the work relationship.”
In a recent case, a state administrative judge ruled that a man who drove for a Georgia limousine service was actually an employee and not an independent contractor, as the company (and the state Department of Labor) claimed. The company had required the man to set up his own limited liability corporation, but the ruling said that made no difference.
The driver used a company car, and he was “given direction as to where to drive, when to drive, how to drive, how often to drive, and the rates to charge customers.”
The judge called this an “extreme” case of misclassification.
Evans’ campaign communications director Seth Clark said she relied on a 2015 Georgia Senate study for the number of misclassified workers.
That report said an accurate estimate was difficult because the state had never done a complete study, as other states have. However, the state Department of Labor reported its inspectors had found “over 4,000 misclassified employees,” across about 1,700 businesses in 2014.
In 2015, it found about 1,500 misclassified workers at 1,800 firms, and in 2016, the number was about 3,000 out of 2,400 firms audited.
Complaints by workers and random selection by inspectors trigger audits. The data show that most audits lead to the discovery of a misclassified worker.
The department told us that currently, it lists nearly 235,000 employers. The review of about 2,400 represents a small fraction, about 1 percent. The Senate report said the department lacked the resources and manpower to “effectively audit and investigate potential violators.”
At the national level, the most recent numbers come from the Government Accountability Office. Its review of IRS data from 2008-10 found that worker classification problems represented 20 percent, or over 3 million cases, of noncompliance issues.
It’s important to note that simply being classified as an employee is no guarantee of health coverage. Companies with fewer than 51 employees face no penalty if they fail to offer insurance under the Affordable Care Act.
A state Senate study said there is no solid estimate of the number of misclassified workers, but state investigators had found between 1,500 and 4,000 instances in each of the past three years, or an average of 2,800 per year. That is based on a review of about 1 percent of businesses, and most reviews reveal a misclassified worker. States that have conducted more systematic studies found misclassification rates in the range of 10 to 20 percent.
The 2,800 average likely misses many instances, and it’s a relatively small number, but it’s enough to support Evans’ statement.
The connection to health care is less clear, because many small employers don’t offer health insurance, nor are they required to. But Evans was careful to include health care as one of several benefits, and her claim doesn’t hinge on that element.
With that caveat, we rate this claim Mostly True.