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Center for Social Policy
McCormack Graduate School
University of Massachusetts Boston
100 Morrissey Blvd.
Boston, MA 02125-3393
Phone: (617) 287 5550
Fax: (617) 287 5544
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UMass-Harvard study finds thousands of workers misclassified
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Author(s):
The Associated Press
Source(s):
Worcester Telegram
Date: December 13, 2004
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Employers seeking to avoid Massachusetts payroll taxes and some employee benefits are wrongly
classifying thousands of Bay State workers as self-employed or independent contractors,
according to a joint report by the University of Massachusetts and Harvard University.
The study, which was to be made public Monday, revealed misclassification is prevalent in a
variety of business sectors. The report said there are 194,000 employers in the Commonwealth.
Using all of the unemployment insurance tax audits conducted by the state Division of
Unemployment Assistance from 2001 to 2003, the researchers from UMass and Harvard's schools
of Law and Public Health found that 36,531 employers misclassified up to 248,000 workers.
The action cost the state $152 million in uncollected income tax revenue, and $35.1 million
in unemployment insurance taxes.
"Employers who do this do not have to carry any responsibility for the worker," said Elaine
Bernard, a principal investigator for the study and executive director of the Labor and
Worklife Program at Harvard Law School. "If they list workers as employees, they must share
in the payment of Social Security taxes, health care, pensions, unemployment insurance and
other benefits. If they misclassify workers, they do not have to pay these hidden costs of
employment."
The study found that 17 percent of all audited employers in transportation and utilities
misclassified workers. Also, 16.1 percent of businesses in education and health services
misclassified workers, 14.3 percent of those in information services, 13.5 percent of the
employers in professional and business services and 11.4 percent of those in construction.
According to the study, 48 percent of the approximately 19,000 Massachusetts workers in
construction are misclassified as independent.
Misclassification can take a number of forms.
Some workers receive cash only and, because the work is undocumented, do not file the 1099
tax forms required of independent contractors by the federal Internal Revenue Service.
Others unknowingly sign waivers absolving employers from the obligation to pay jobless
benefits or workers' compensation insurance.
"In an environment of recession, there is greater pressure on workers to accept this kind
of employment arrangement," said Francoise Carre, a professor at the McCormack Graduate
School of Policy Studies at UMass-Boston. "But it makes them vulnerable because they do not
have any of the protections of an employee."
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