- Report Published -
|Review of Employee Misclassification in Virginia|
|Joint Legislative Audit and Review Commission|
|SJR 345 (Regular Session, 2011)|
|*The Executive Summary was replaced in its entirey by the Joint Legislative Audit and Review Commission on July 16, 2012.|
Senate Joint Resolution 345 (2011) directed JLARC to study the misclassification of employees as independent contractors. Employers who misclassify workers can lower their costs by up to 40 percent while employers who properly classify workers pay higher payroll costs and may be less competitive in their respective industries. Misclassified workers are often denied certain legal rights and benefits.
A Virginia Employment Commission (VEC) audit of one percent of Virginia employers found 5,639 workers were misclassified in 2010. Based on estimates in other states, Virginia could have on the order of 40,000 misclassifying employers and 214,000 misclassified workers. Worker misclassification lowers Virginia’s state income tax collections, leading to estimated foregone revenues on the order of $1 million for workers identified during VEC audits and $28 million in total based on other states’ findings in 2010.
The report makes several recommendations to enhance compliance with existing requirements for classifying employees and to make misclassification illegal in Virginia.