One of the issues recently studied during interim committees was the problem of worker misclassification and the payroll tax fraud that results from such misclassification. The Interim Study Committee on Employment and Labor held a full meeting just on this topic, and three Senate Democrats – Sen. Karen Tallian, Sen. David Niezgodski and Sen. J.D. Ford – were all in attendance.

So what is worker misclassification, and why is it a big problem for Indiana? Well, worker misclassification takes place when an employer classifies an employee as an independent contractor – not a full-time employee with benefits – in order to pay less taxes. These misclassified employees can be denied access to benefits they are entitled to by law, such as a minimum wage, overtime compensation, unemployment insurance or family and medical leave. When businesses partake in this practice, they avoid paying necessary payroll taxes to our state, including payments to Indiana’s unemployment insurance and workers’ compensation funds.

The first step? Getting a mechanism to determine how far-reaching this problem is and how much money the state could be losing from these businesses avoiding required payments. Sen. Niezgodski has introduced a bill for two sessions now trying to get that type of reporting ability for the state. Hear him talk about his bill and his concerns during the committee meeting here.

Senate Democrats have been gaining bipartisan support to tackle this issue, so you can be sure to see bills introduced to help curb the payroll fraud taking place in some Indiana businesses. In fact, Sen. Tallian has already started working on legislation for the next legislative session that would address worker misclassification and its accompanying payroll fraud.

Stay tuned for more updates!