L & I Secretary Joins Eastern Atlantic States Regional Council of Carpenters to Call for End to Worker Misclassification

Pennsylvania Department of Labor & Industry (L&I) Secretary Nancy A. Walker joined a bipartisan group of Pennsylvania lawmakers and the Eastern Atlantic States Regional Council of Carpenters to highlight efforts to tackle worker misclassification in Pennsylvania.

Governor Josh Shapiro has urged the General Assembly to pass his proposed 2024-25 budget that invests $1.2 million in L&I’s Bureau of Labor Law Compliance, which enforces 13 Pennsylvania labor laws. L&I would use those funds to hire an additional 12 labor law compliance investigators, bringing the bureau’s complement to 39 investigators responsible for enforcing labor laws across the Commonwealth’s 67 counties.

“To be blunt, we need more resources to combat worker misclassification in Pennsylvania. With just 70 percent of Pennsylvania’s population, New Jersey has 70 labor law investigators and plans to add 10 more,” Secretary Walker said. “This is an issue that affects every Pennsylvanian in one way or another but we need boots on the ground to do it.”

Worker misclassification occurs when an employer wrongly classifies a worker as an independent contractor instead of an employee, denying workers essential rights and benefits employees are entitled to. This practice also harms taxpayers because bad-actor employers use misclassification to avoid paying state and local taxes.

L&I’s Office of Unemployment Compensation Tax Services conducted 3,235 audits in 2023 and found $4.3 million in underreported UC taxes due to worker misclassification.

Act 72 – one of the 13 labor laws enforced by L&I — specifically protects construction employees from losing protections and benefits which occurs when employers misclassify construction employees as independent contractors. Construction employers who follow the rules are also harmed by misclassification because they lose out on contracts to Act 72 violators who take illegal shortcuts on labor costs. In 2023, L&I collected about $414,000 from 138 employers who misclassified 712 employees.

The Task Force also found that such misclassification results in an annual loss of $91 million to Pennsylvania’s Unemployment Compensation Trust Fund. For individual workers who suffer injury or illness on the job, the costs add up to more than $153 million in lost workers’ compensation insurance coverage.