A Harvard University study titled “Confronting Misclassification and Payroll Fraud: A Survey of State Labor Standards Enforcement Agencies” shows that one of the best methods of discovering misclassification is a state tip line.

There has been an increase in misclassifying workers as independent contractors, which means that employers may not be providing the proper wages, workers’ comp premiums, unemployment payments or taxes. This could harm workers and it is a big drain on state budgets.

Study authors gave 27 states written surveys and then followed up with labor standards enforcement agencies in 9 of those states. Most of the input came from state departments of labor. The goal of the information gathered is to help state labor standards officials gain awareness of what their counterparts are doing to prevent misclassification, to establish some baseline practices for states and to share new approaches that could be considered more broadly.

They found that one of the best ways to find out about misclassification are tip lines, and 61 percent of the agencies surveyed have a telephone tip line while 86 percent have an internet submission. Another method is the “ABC” test which assumes that workers are employees unless certain conditions are satisfied- if the work is done without direction from the employer, if it is performed outside the usual course of the employer’s business, and if it is done by someone who has their own independent business doing that type of work.

Among the agencies surveyed, 29 percent reported their priorities were driven by complaints while 71 percent said investigations were based on a combination of complaints as well as agency investigations.

Read the study here and read more here.