How Misclassification Shortchanges Women Workers

Introduction

Under federal, state, and local laws, workers throughout the United States have a number of foundational legal rights that create significant protections in the workplace, including minimum wage, overtime, and paid sick leave. However, the vast majority of these laws only protect workers who are labeled as “employees,” and leave out workers who are labeled as “independent contractors.” When workers are improperly labeled as independent contractors, they miss out on many key protections, leading to significant real costs to workers.

In principle, existing law seeks to protect workers against this misclassification of their legal status. Because the employment law landscape is much less protective of independent contractors than employees, many corporations and employers purposely misclassify their workers in order to shirk their responsibilities and bolster their bottom line. For example, because employers do not pay payroll taxes or the cost of social insurance programs that are funded through payroll contributions (such as workers’ compensation) for independent contractors as they do for employees, misclassifying workers can significantly reduce employers’ payroll costs.[i] Instead, these costs are often directly shifted onto misclassified workers, such as in the case of Social Security and Medicare contributions.[ii] Misclassified workers also bear indirect costs in the workplace as they lack access to a number of workplace standards and protections that employees benefit from, such as paid sick leave and overtime.[iii] This gap between what employers must pay if they hire a worker as an employee and what they must pay if they hire that same worker as an independent contractor gives firms a significant incentive to declare that a worker is an independent contractor, rather than an employee.

The practice of mislabeling an employee as an independent contractor is known as “misclassification,” and it is on the rise across industries.[iv] While no official statistics exist on the number of employees misclassified as independent contractors, an analysis by the Bureau of Labor Statistics of 2023 data from the Contingent Work Supplement of the Census Bureau’s Current Population Survey found that 11.9 million workers were employed as independent contractors, up from 10.6 million in May 2017.[v] The Bureau of Labor Statistics, however, did not estimate the share of these workers who were incorrectly classified as independent contractors. Though some workers can lawfully be categorized as independent contractors, as alternative work arrangements become increasingly present throughout different sectors of the economy, it is important to monitor the impact on workers, many of whom may be suffering from misclassification.[vi]

An earlier review of the available research by the National Employment Law Project concludes that studies at the state and national level found “that 10 to 30 percent of employers (or more) misclassify their employees as independent contractors, which indicates that several million workers nationally may be misclassified.”[vii]

This report analyzes publicly available data for ten occupation groups that have both large shares of women workers and are among those that researchers have identified as particularly vulnerable to the misclassification of employees as independent contractors. We document the range of potential direct costs to misclassified women workers in these occupations. We also note, but don’t estimate, the indirect costs of misclassification—in the form of downward pressure on wages—for women working as employees in these same occupations where misclassification is widespread.

[i] Ismael Cid-Martinez et al., Misclassifying Workers As Independent Contractors Is Costly for Workers and Social Insurance Systems, Econ. Pol’y Inst. (Apr. 15, 2026), https://www.epi.org/publication/misclassifying-workers-as-independent-contractors-is-costly-for-workers-and-social-insurance-systems/.
[ii] Ismael Cid-Martinez et al., Misclassifying Workers As Independent Contractors Is Costly for Workers and Social Insurance Systems, Econ. Pol’y Inst. (Apr. 15, 2026), https://www.epi.org/publication/misclassifying-workers-as-independent-contractors-is-costly-for-workers-and-social-insurance-systems/ (explaining that independent contractors bare the full cost of Social Security and Medicare contributions).
[iii] For a non-exhaustive list of workplace protections that independent contractors lack as compared to employees, see End Independent Contractor Misclassification, Nat’l Emp. Law Project, https://www.nelp.org/explore-the-issues/contracted-workers/misclassified-workers/ (last accessed Aug. 26, 2026).
[iv] See generally Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries, Nat’l Emp. Law Project (Oct. 20, 2020), https://www.nelp.org/insights-research/independent-contractor-misclassification-imposes-huge-costs-workers-federal-state-treasuries-update-october-2020/.
[v] See Table 5A in Bureau of Labor Statistics, “Contingent and Alternative Employment Arrangements – July 2023,” November 8, 2024, https://www.bls.gov/news.release/pdf/conemp.pdf and Table 5 in Bureau of Labor Statistics, “Contingent and Alternative Employment Arrangements News Release,” June 7, 2018, https://www.bls.gov/news.release/archives/conemp_06072018.htm.
[vi] For more information on workers who may qualify as independent contractors, see End Independent Contractor Misclassification, Nat’l Emp. Law Project, https://www.nelp.org/explore-the-issues/contracted-workers/misclassified-workers/ (last accessed Aug. 26, 2026).
[vii] National Employment Law Project, “Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries,” Policy Brief, October 2020, https://www.nelp.org/app/uploads/2017/12/Independent-Contractor-Misclassification-Imposes-Huge-Costs-Workers-Federal-State-Treasuries-Update-October-2020.pdf. See also James Parrot and L.K. Moe, “For One in Ten New York Workers, ‘Independent Contractor’ Means Underpaid and Underprotected,” Center for New York City Affairs, The New School, June 2022. https://www.centernyc.org/reports-briefs/one-in-10-new-york-workers-independent-contractor-means-underpaid-and-unprotected.