An audit of the Minnesota workforce by the group North Star Policy Action found that upwards of 10 percent of the state’s workers may be misclassified, which could have a significant impact on those employees’ ability to collect workers’ compensation if they are ever injured on the job.
The report was released earlier this month, but it examined employer data from 2019. It revealed that approximately 316,000 Minnesota workers, which represents 9.4 percent of the state’s private-sector workforce, suffered from payroll fraud. The group said the bulk of this payroll fraud came in the form of employee misclassification, which occurs when employers illegally classify workers as independent contractors instead of employees. This move allows them to avoid some labor laws and prevents the employee from access to certain benefits, like overtime pay, health insurance, unemployment benefits and workers’ compensation.
Massive Financial Implications
So how much did this misclassification end up costing employees? According to the report, compensation losses for Minnesota workers were estimated between $2.9 to $6.2 billion. The state also gets shortchanged by employee misclassification, as they lose revenue from employer contributions to programs like social security income tax collection. The report estimates that the state of Minnesota lost between $506 million and $1.3 billion due to payroll fraud in 2019. When compensation to federal programs is included, the total tax revenue losses rise to between $1.04 and $2.1 billion.
“This data shows that payroll fraud is a huge issue in Minnesota – one that hurts victims and taxpayers alike – and it demands more attention from policy makers,” said Jake Schwitzer, Executive Director of North Star Policy Action. “While the state has recently taken important steps to address payroll fraud, we hope this report helps state leaders take further action to crack down on these illegal practices.
The group said that they used conservative assumptions when possible, meaning that the actual financial impact of payroll fraud may be greater, and they called on the state to either conduct a more comprehensive analysis of worker misclassification and payroll fraud or provide more detailed data at the state level.
“Ultimately, greater analysis by state agencies is needed to identify worker misclassification and hold bad actors accountable when it is found,” said Schwitzer. “We applaud the Task Force’s existing work around data practices, and we look forward to presenting our report to advance those efforts.”
You can view the full report by clicking here, and we commend the North Star Policy Group for bringing attention to this serious matter. When workers are unjustly kept from being able to collect workers’ compensation because they are misclassified, employees and their families suffer.
We’ve talked about employee misclassification on several occasions on the blog, and if there’s even a chance that you are being misclassified as an independent contractor who is ineligible for workers’ compensation and other employee protections, talk to a workers’ compensation lawyer. We’re here to get you the compensation you deserve, whether that’s after an injury or when benefits are withheld from misclassified workers.
For more information or to learn more about the possibility of moving forward with an injury or misclassification claim, reach out to the team at Hey Workers today at (844) 439-9675.
