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Worker misclassification hearing focuses on gig economy

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(The Center Square) — Misclassification that’s shorting workers and the state’s safety net has some legislators looking askance at gig work.

Legislators of both parties have raised concerns, though on different problems.

Republicans have called misclassification “the greatest criminal activity throughout the state besides the drug trade” in regards to its economic impact. Paying an employee as if they were an independent contractor means the state’s unemployment compensation trust fund loses almost $100 million annually.

Democrats have focused more on the gig economy and unionized labor getting undercut by non-union firms.

“Until we make a decided shift in favor of employees, things are not going to change,” Rep. David Delloso, D-Ridley Park, said during a House Labor Committee hearing on Tuesday. “With covid and the influx of the gig economy, it’s gotten worse.”

He pointed to situations where transportation companies shift from bidding for contracts with full-time employees, but getting beat out by companies who treat their drivers as independent contractors, lowering their costs.

“Frankly, the state has missed the ball on millions upon millions — if not billions of dollars — in general fund revenue that should be returned to the workforce by way of progress,” Delloso said.

Legislators heard from gig workers who spoke of their time as independent contractors being monitored and controlled by their employer, and problems with the state’s unemployment system from providing them timely payments.

“Misclassification is a form of wage theft,” said Julia Simon-Mishel, supervising attorney of the unemployment compensation unit at Philadelphia Legal Assistance.

Simon-Mishel said a common form of misclassification was businesses who treat independent contractors like any other employee, with the problem across industries from home health agencies to driving companies.

“This partnership is actually a facade; these individuals really remain at the whim of companies for their assignments and pay structure,” she said.

Christopher Hallock, deputy secretary of safety and labor management relations in the Pennsylvania Department of Labor and Industry, called misclassification an issue of fairness.

“Misclassification is one of the biggest and pervasive problems in Pennsylvania,” he said. “It robs workers of wages they’ve earned and robs them of protections.”

Hallock blamed noncompliance on a lack of education, arguing that with more staff focused on misclassification, the department could make things better.

“These violations are going up every single year,” he said.

More investigators could be more vigorous in their follow-up of employers that violate the law, he said, and check more job sites.