Agenda - Council Work Session - 07/28/2026

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HOME - FACTS - TABLES - VIDEOS - INFOGRAPHICS - AGENCIES - RESEARCH Worker Misclassification Disproportionately Affects Vulnerable Po • ulations There is currently no federal law against worker misclassification. When the Department of Labor investigates misclassification cases, it is often by proxy of investigating Fair Labor Standards Act violations such as minimum wage violations, which frequently coincide with misclassification cases (GAO, 2009). As a result, worker misclassification is often an issue decided by state law, meaning those affected most by wage theft and payroll fraud are generally people who do not have federal avenues. Research has found that 43% of workers who have a legal complaint against their employers do not proceed with their complaints formally, citing lack of confidence in the claims or lack of legal knowledge and resources as the primary reasons (Alexander & Prasad, 2014). Additionally, a CBS News investigation of 650,000 complaints across the United States found that state agencies only ruled in favor of claimants about half the time — and claimants are not compensated in one-third of successful cases (Hacker et al., 2023). Lack of resources and unpunished violators lead to misclassification and payroll fraud among vulnerable workers. Immigrants are a vulnerable group that is particularly susceptible to wage theft. Research shows that both authorized immigrants and undocumented workers are more likely to experience wage theft in their employment. However, it is estimated that more than 1-in-10 construction workers are undocumented workers (Isser, 2023). Immigrant workers may be forced to endure conditions that are exploitative for fear that their immigration status, or that of their co-workers, will be questioned (Cooper & Kroeger, 2017). Immigrants working in construction are often subject to misclassification and late payment of wages, and many do not engage in remedial paths as they have little hope that they will recover wages that were stolen. It is common that companies will completely liquidate to avoid repayment of stolen wages, leaving workers without compensation of any kind (Juravich, Ablaysky, & Williams, 2015). Some construction contractors have been convicted on charges of forced labor —recruiting undocumented workers from Mexico and then refusing to pay them while threatening them with violence or deportation so they would not complain (Slowey, 2019). Immigrants are overrepresented in independent contractor populations, which is especially harmful because hiring independent contractors allows employers to bypass the Immigration Reform and Control Act (Moe, Parrot, & Rochford, 2020). By bypassing IRCA, employers do not verify the immigration status of their workers and benefit financially by exploiting those whom they suspect to be unauthorized (Carre, 2015). This puts migrant laborers in a precarious situation in which complaints that lead to federal investigations could result in personal consequences, especially when Memoranda of Understanding between the U.S. Department of Labor and the U.S. Immigration and Customs Enforcement expire (Hallett, 2018). While vulnerable populations are particularly susceptible to misclassification, other demographic groups are not immune. Research indicates that during the growth of misclassification in the early 2000s, almost two-thirds of workers classified as independent contractors were white and had some college or higher - level education (GAO, 2007). Misclassification rates among construction workers in some states are as high as 40%, making it a practice most construction workers will encounter during their careers (Ruckelshaus, 2007). Steps can be taken to protect all workers —regardless of their citizenship or immigration status —from the problem of illegal misclassification and wage theft. 5