Contingent Workers Constitute a Relatively Constant Proportion of the Workforce and Are Diverse

Contingent workers constituted a relatively constant proportion of the  total workforce from 1995 through 2005 and had diverse characteristics. In 2005, there were about 42.6 million  contingent workers in the workforce. As shown in table 2, while the  number of contingent workers grew from 39.6 million workers in 1995 to  42.6 million workers in 2005, contingent workers’ share of the total  workforce remained relatively constant over this time period. Contingent workers are employed in a wide range of industries and  occupations. A Smaller Proportion of Contingent Workers than Others Has Benefits or Is Covered by Key Workforce Protection Laws

A smaller proportion of contingent workers than of standard full-time  workers has health insurance or pension benefits, or receives protections  offered by key workforce protection laws, including ones designed to  ensure proper pay and safe, healthy, and nondiscriminatory workplaces. Finally, contingent workers are less likely than  standard full-time workers to receive protections offered by key  workforce protection laws. Some laws contain requirements that exclude  certain categories of contingent workers or contain certain time-in-service  requirements that make it difficult for them to be covered. Just over half of  workers—both contingent and standard full-time—who lacked employer- provided health insurance coverage in 2005 worked for an employer who  offered health insurance to some of its employees. Some Categories of Contingent Workers Are Not Covered by Key Laws Designed to Protect Workers

Contingent workers who are employees are generally protected under key  laws designed to protect workers, but certain categories of contingent  workers—such as independent contractors and self-employed workers— may be excluded from coverage under these laws. These exemptions affect some categories of contingent  workers more than standard full-time workers because a greater  proportion of these contingent workers is in the agriculture industry; for  example, an estimated 11 percent of self-employed workers, 2 percent of  on-call workers and day laborers, 2 percent of independent contractors,  and 1 percent of direct-hire temporary workers are employed in  agriculture, compared with 1 percent of standard full-time workers. DOL Detects and Addresses Employee Misclassification through Investigations, but Offices We Studied Vary in How Often They Forward Misclassification Cases to Other Federal and State Agencies

DOL detects and addresses employee misclassification when enforcing the  FLSA minimum wage and overtime pay provisions. As part of its FLSA  investigation process, DOL examines the employment relationship— whether a worker is an employee or an independent contractor—to  determine which workers are covered. DOL  procedures require officials to share information with other federal and  state agencies whenever investigators find possible violations of other  laws. In discussing a  misclassification case with the employer, the investigator would explain  that the workers should be classified as employees, not independent  contractors, and that the employer may be violating other laws  administered by other agencies, such as tax laws or workers’  compensation laws. However, investigation reports do not always include the reason  for the violation. While DOL relies heavily on complaints  from workers to enforce FLSA, the FLSA workplace poster does not  provide a telephone number for workers or others to call to register  complaints. DOL investigators identify instances of employee misclassification when  responding to minimum wage and overtime pay complaints. While DOL investigators conducting FLSA investigations are required to  share information with other federal and state agencies whenever they  find instances of possible violations of other laws, DOL district offices we  studied varied in how often they forwarded misclassification cases to  other agencies. Appendix I: Objectives, Scope, and Methodology

The objectives of our study were to determine (1) the size and nature of  the contingent workforce, (2) the benefits and workforce protections  provided to contingent workers, and (3) the actions that the Department  of Labor (DOL) takes to detect and address employee misclassification. 201)

The Fair Labor Standards Act establishes minimum wage, overtime, and  child labor standards for employees.
Why GAO Did This Study

Millions of U.S. workers participate in "contingent" employment, such as temporary or part-time work, and not in permanent or full-time jobs. The Department of Labor (DOL) enforces several labor laws to protect these and other workers, including the Fair Labor Standards Act (FLSA), which provides minimum wage, overtime pay, and child labor protections. In June 2000, GAO reported that contingent workers lagged behind standard full-time workers in terms of income, benefits, and workforce protections, and that some employees do not receive worker protections because employers misclassified them as independent contractors. GAO was asked to update this report by describing (1) the size and nature of the contingent workforce, (2) the benefits and workforce protections provided to contingent workers, and (3) the actions that DOL takes to detect and address employee misclassification. We analyzed DOL survey data on contingent workers and interviewed DOL officials.

What GAO Found

Contingent workers constituted a relatively constant proportion of the total workforce from 1995 through 2005 and had diverse characteristics. While the population of the contingent workforce grew by an estimated 3 million workers during this time period, the proportion of contingent workers in the total workforce remained relatively constant at about 31 percent. In 2005, there were about 42.6 million contingent workers in the workforce. Contingent workers vary in terms of their demographic characteristics, industries, and occupations. For example, on average, contingent workers range in age from about 35 years for one category of temporary workers to about 48 years for self-employed workers. In addition, contingent workers are employed in a wide range of industries and occupations, including the services industry, construction, and retail trade. A smaller proportion of contingent workers than of standard full-time workers has health insurance or pension benefits, or is protected by key workforce protection laws, including laws designed to ensure proper pay and safe, healthy, and nondiscriminatory workplaces. While 72 percent of standard full-time workers received employer-provided health insurance in 2005, the proportion of contingent workers who received employer-provided health insurance ranged from 9 to 50 percent, depending on the category of contingent worker. With regard to pension benefits, 76 percent of standard full-time workers reported working for an employer who offered a pension, whereas 17 to 56 percent of contingent workers reported working for an employer who offered a pension. One reason that contingent workers are less likely to receive protections is that some laws contain requirements that exclude certain categories of contingent workers. DOL detects and addresses misclassification of employees by investigating complaints, but does not always forward misclassification cases to other federal and state agencies. Some workers do not receive worker protections to which they are entitled because employers misclassify them as independent contractors--a category of contingent workers excluded from many protections--when they should be classified as employees. DOL investigators detect and address employee misclassification primarily when responding to FLSA minimum wage and overtime pay complaints. DOL investigators examine whether a worker is an employee or an independent contractor to determine coverage under FLSA. DOL relies heavily on complaints from workers to enforce FLSA, but the FLSA workplace poster does not contain any information on employment classification or provide a telephone number for individuals to register complaints. Misclassification of employees may contribute to an FLSA violation or may violate laws enforced by other agencies, such as tax laws. DOL procedures require officials to share information with other federal and state agencies whenever investigators find possible violations of other laws. However, the district offices we contacted vary in how often they forward misclassification as a possible violation of other agencies' laws.