Workers Compensation Misclassification Laborers International Union of North America Construction Department.

Workers’ CompensationMisclassification

Laborers’ International Union of North AmericaConstruction Department

Missouri Contractors’ Credit Premium Adjustment Program (Construction only)

Average Hourly Wage CreditLess than $16.00 0.00%$16.00 to $16.49 0.70%$16.50 to $16.99 2.70%$17.00 to $17.49 4.70%$17.50 to $17.99 6.50%$18.00 to $18.49 8.30%$18.50 to $18.99 9.90%$19.00 to $19.49 11.50%$19.50 to $19.99 13.00%$20.00 to $20.49 14.40%$20.50 to $20.99 15.70%$21.00 to $21.49 17.00%$21.50 to $21.99 18.20%$22.00 to $22.49 19.40%

Discount Comparison Table for 2005

Average Hourly Wage Credit$22.50 to $22.99 20.50%$23.00 to $23.49 19.40%$23.50 to $23.99 22.60%$24.00 to $24.49 23.50%$24.50 to $24.99 24.50%$25.00 to $25.49 25.40%$25.50 to $25.99 26.30%$26.00 to $26.49 27.10%$26.50 to $26.99 27.90%$27.00 to $27.49 28.70%$27.50 to $27.99 29.40%$28.00 to $28.49 30.10%$28.50 to $28.99 30.80%$29.00 to $29.49 31.50%$29.50 to $29.99 32.10%

Discount Comparison Table for 2005

Illinois Workers’ Compensation Statistics

• 7th highest in wages • 23rd highest in premium rates• 37th highest in injury rates

Source: 2004 Annual Report

The Labor Ready Story

• Information was obtained from the monopolistic States of – Ohio– West Virginia– Washington

Ohio

• Labor Ready construction workforce misclassified as:– Retail store employees: 10.2%– Clerical office employees: 8.8%

Washington

• Labor Ready construction workforce misclassified as:– Office services employees: 47%

West Virginia

• Labor Ready construction workforce misclassified as:– Miscellaneous repair and maintenance

(includes piano tuning, taxidermists, chain saw repair, lawn mower repair, firearm repair)

West Virginia Piano Tuners or Construction Workers

• Larry Richards dispatched by Labor Ready to 126 construction/landscaping projects

• 99 times classified as a taxidermist/ piano tuner at $1.11 per $100 of payroll

• Construction trades workers’ compensation rate is minimum $10 per $100 of payroll.

Source: The Sunday Gazette-mail, Charleston, WV

Economic Impact of Misclassification in Ohio

% of Payroll0.43%

10.86%-10.43%

Number of Employees Hourly Wage Hours per Year Annual Payroll Underpayments100 $10 2000 $2,000,000 -10.43% -$208,600.00100 $20 2000 $4,000,000 -10.43% -$417,200.00

% of Underpayment due to misclassificationHypophetical Analysis

OhioWorkers' Compensation InsuranceClerical EmployeesLandscape Gardening and Drivers

$/per hour $0.08$2.16-$2.08

Number of Employees Hourly Wage Hours per Year Total Hours Underpayments100 $10 1500 150,000 -$2.08 -$312,000.00100 $10 2000 200,000 -$2.08 -$416,000.00

WashingtonWorkers' Compensation InsuranceOffice Services EmployeesConstruction Services$ Underpayment due to misclassificationHypophetical Analysis

Economic Impact of Misclassification in Washington

Economic Impact of Misclassification in West Virginia

*includes piano tuning, taxidermists, chain saw repair, lawn mower repair, firearm repair

% of Payroll1.11%

10.00%-8.89%

Number of Employees Hourly Wage Hours per Year Annual Payroll Underpayments100 $10 2000 $2,000,000 -8.89% -$177,800.00100 $20 2000 $4,000,000 -8.89% -$355,600.00

Hypophetical Analysis

West VirginiaWorkers' Compensation InsuranceMiscellaneous Repair and Maintenance *Construction Trades (minimum)% of Underpayment due to misclassification

Misclassification Example

• The Tenth Diamond Inc. and Astech Corp. are both owned by the same owner in Charleston, WV– Tenth Diamond, Inc. is classified as General

Construction contractor paying $9 per $100 of payroll– Astech Corp. is classified as Asbestos Removal

contractor paying $48 per 100 of payroll, but has no employees

• Astech leased all employees from Tenth Diamond, Inc.

• The State of WV claims that Astech/Tenth Diamond owes the state $800,000 in workers’ compensation premiums.

NCCI Manual Premium Rates

IL MOIron or Steel Erection

Metal Bridges - 5040 33.40% 22.55%

Dam or Lock Construction Concrete Work - 6017 18.48% N/A Earth Moving - 6018 4.74% N/A

Excavation and DriversRoad, dam and tunnel construction -6217 6.23% 5.24%

Street or Road Construction Paving or Repaving - 5506 8.52% 6.32%

Taxidermist 2.14% 1.68%

NCCI Manual Premium Rates (% of payroll)

NCCI Manual Premium RatesEffects of Misclassification

NCCI Manual Premium RatesIL MO

33.40% 22.55%4.74%

2.14%

Number of Employees Hourly Wage Hours per Year Annual Payroll % Underpayment Underpayments100 $10 2000 $2,000,000 -28.66% -$573,200.00100 $20 2000 $4,000,000 -28.66% -$1,146,400.00

Number of Employees Hourly Wage Hours per Year Annual Payroll % Underpayment Underpayments100 $10 2000 $2,000,000 -20.41% -$408,200.00100 $20 2000 $4,000,000 -20.41% -$816,400.00

Hypophetical Analysis of Misclassification of Ironworkers for Taxidermists in Missouri

Ironworkers - (Metal Bridges -5040) Dam or Lock Construction (Earth Moving - 6018) Taxidermist Hypophetical Analysis of Misclassification of Ironworkers for Earth Moving Workers in Illinois

Percent of Payroll

Conclusion

• Workers’ Compensation Misclassification costs legitimate contractors, jobs.

• States and insurance companies need more enforcement and penalties.

Workers’ CompensationMisclassification

Laborers’ International Union of North AmericaConstruction Department