Date of Award

Fall 1-15-2016

Degree Type

Thesis (Restricted access)

Degree Name

Master of Science (MS)

Department

Computer Science

First Advisor

Margaret McCoey

Abstract

Misclassifying employees as independent contractors became an issue in the early 2000's. However, with the election of President Barack Obama and his Employee Misclassification Prevention Act of 2008; this issue began gaining steam in the legal and legislative circles. The Government Accountability Office (GAO) estimated that in 2006, the federal government failed to collect $2.72 billion in Social Security, unemployment, and income taxes because of misclassification. Illinois showed that the state lost close to $125 million in income tax revenue from 2001-2005. A New York task force investigating workplace fraud found that in 2008, the misclassification of workers cost the state more than $4.8 million in unemployment taxes. (Employee Misclassification, 2015).

Misclassification of workers has serious implications for state and federal governments. They both rely heavily on the revenue generated from the collection of these taxes. This income is necessary to pay several different benefits to "workers" including unemployment, which was a big issue in 2008 as the nation’s unemployment level started to increase.

This paper will examine the issue of employee classification and how misclassification occurs. It will explore the many ways misclassification can occur both intentional and unintentional. It will look into the industries that have been singled out with class action lawsuits as well as independent lawsuits impacting the workers. This paper will study the legal issues, both federal and state, that arise due to employee misclassification, and the different organizations (both federal and state) that have joined the fight against this workplace fraud.

This paper will address the loopholes that the employers have exploited for their benefit. It will also examine the current prevention tactics in place as well as make recommendations on the future of combatting this fraud.

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