Maryland Report Says Many Workers Misclassified, Costing $59M in Comp Premiums

Worker misclassification in Maryland is widespread, leaving thousands of workers without injury protection and depriving insurance companies of more than $58 million in workers’ compensation premiums each year, according to a new report from a state task force.

Maryland’s Joint Enforcement Task Force on Workplace Fraud said that its examination had found more than 5,500 workers in the state in 2024 were misclassified as independent contractors, not employees. The true numbers may be even higher. The report cited another recent analysis, by The Century Foundation, that found that more than 23,700 construction workers – about 11% of construction workers in the state – are misclassified.

“The prevalence of workplace fraud erodes contracting and labor standards, undermines labor markets, and makes it financially difficult for responsible, law-abiding businesses to compete with businesses engaging in misclassification,” the task force report concluded.

State officials echoed the concerns.

“Misclassifying workers is not an acceptable business practice, and it is alarming to see the rate at which some employers are engaged in this egregious behavior,” Maryland Comptroller Brooke Lierman said in a statement.

Lierman was one of eight state officials on the task force, which was chaired by Portia Wu, secretary of labor for Maryland.

The concerns are not new. Insurers, large contractors, and labor unions for years have raised alarms about the rampant problem of subcontractors and other businesses that underreport payroll and avoid workers’ compensation coverage.

The report recommended holding general contractors responsible. That “would mean that those contractors who benefit most from misclassifying workers share equally in the responsibility for penalties as well,” the task force said.

“Currently, general contractors have no incentive to ensure compliance with the law. Contractors at the top of the chain obtain the financial benefit of a lower-cost workforce when their subcontractors engage in workplace fraud, but bear no responsibility,” the report noted.

The task force also suggested that the state could create procurement preferences or incentives for businesses that ensure that they and their subcontractors are complying with the law.

The full report can be seen here.

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