In an effort to crack down on worker misclassification, Alaska’s Department of Labor and Workforce Development recently signed Memorandums of Understanding (MOUs) with the Division of Insurance, Department of Revenue, and the U.S. Department of Labor.
Worker misclassification is the practice of mislabeling employees as independent contractors, or inaccurately classifying employees in lower paying job categories, in order to avoid paying state and federal taxes.
These MOUs will improve enforcement of the law and prevent unscrupulous businesses from undercutting legitimate enterprises that pay workers compensation and unemployment insurance.
“With these law enforcement agreements, we are standing up for businesses that play by the rules and for workers who are being exploited,” said Commissioner Heidi Drygas. “At a time of unprecedented fiscal pressure for the state, we will do everything in our power to reduce tax fraud perpetrated through worker mis classification.”
The non-partisan National Conference of State Legislatures estimated that mis classification costs states millions and, in some cases, billions of dollars per year. National studies indicate that mis classification affects some 15,000 to 20,000 Alaska workers.
Those workers do not receive state and federal benefits and protections including Social Security, unemployment insurance, and workers compensation.
Mis classification also hurts law-abiding Alaska businesses.
They face higher employee costs than competitors who cheat to get out of paying payroll taxes, unemployment insurance taxes, and workers comp premiums.
Author Kori Shafer-Stack, Editor, Amaxx Risk Solutions, Inc. is an expert in post-injury response procedures and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. www.reduceyourworkerscomp.com. Contact: [email protected].
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