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