Misclassification of Workers in Iowa

The misclassification of workers as “independent contractors” rather than “employees” is a growing problem in Iowa and across the nation. The misclassification of workers threatens Iowa’s economy, its businesses and its workers - which are the most important resource we have.

Iowa employers must report wages to Iowa Workforce Development (IWD) Operations Division and pay unemployment insurance (UI) tax on wages paid to employees as required. Iowa employers must generally withhold State and Federal income taxes, as well as withhold and pay Social Security and Medicare taxes.

When employers misclassify workers they:

  • avoid paying taxes
  • may avoid workers compensation coverage
  • may fail to follow wage, contractor registration, labor laws and/or other employment laws
  • may be more financially capable to underbid honest, law-abiding businesses that are paying all taxes owed​

​Employee vs. Independent Contractor Determinations

IWD investigates cases of potential misclassification on an individual basis and will issue a determination on whether the person providing service is an employee or an independent contractor.

When determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.  

  • The right to control the work to be done and how it will be done is one of the main factors considered. 
  • The right to discharge a worker at will and without cause is also strong evidence of the right of direction and control. ​

The Internal Revenue Service (IRS) provides excellent resources to help determine the proper classification of workers as employees or independent contractors. 

Legal Impact of Misclassification of Workers

Intentional misclassification of workers is illegal. Misclassification of workers impacts the following Iowa laws:

Intentional misclassification constitutes tax and insurance evasion. Employers misclassifying their workers may face the following consequences:

  • penalties and fines
  • interest on back taxes
  • criminal charges under various laws​

Reporting Suspected Misclassification of Workers

The Misclassification Report form 69-0009 may be used to report suspected misclassification of a worker. The completed form may be submitted by US mail, fax or email. You may also report suspected misclassification of workers by telephone.

Contact Information

Iowa Worker Misclassification Unit                                             
Iowa Workforce Development
1000 East Grand Avenue
Des Moines, IA 50319
Telephone: 515-725-1088 or 800-562-4692
Fax: 515-242-6301
email: misclassification@iwd.iowa.gov