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Employee Misclassification

Employee Misclassification

What is worker misclassification?

Worker misclassification occurs when an employer improperly classifies an employee as an “independent contractor” or “member” of a Limited Liability Company (LLC) in order to avoid legal obligations that arise from the employer/employee relationship.

Who suffers when workers are misclassified?

  • Workers: Workers improperly classified as “independent contractors” or “members” of LLCs may lose protections of federal and state laws such as workers’ compensation, unemployment insurance, payment of wages (including minimum wage and overtime), occupational safety and health, and employment discrimination.
  • Employers: By misclassifying workers in order to avoid their legal obligations, unscrupulous employers undercut their responsible, law-abiding competitors. In other words, employers who misclassify obtain an unfair competitive advantage against honest employers.
  • The General Public: Worker misclassification leads to “cost shifting”—costs of workplace injuries or unemployment that should be paid by an employer are shifted to the government, insurance companies and others. This results in higher health care costs, insurance premiums, is a drain on public assistance and charity, and loss of tax revenues.

How to report worker misclassification

If you think an employer is misclassifying workers, please notify the Utah Labor Commission by calling (801) 530-6228. Commission staff will discuss your complaint with you and then take appropriate action to investigate the complaint.