Attorney General Richard Cordray last week announced an "unprecedented collaboration of state agencies" to combat the misclassification of workers.

Attorney General Richard Cordray last week announced an "unprecedented collaboration of state agencies" to combat the misclassification of workers.

Employee misclassification, according to the announcement, is part of an "underground economy" in which an employer improperly classifies individuals as independent contractors or pays them off the books to avoid taxes and other required payments.

As a result, Cordray indicated, the state and local governments lose hundreds of-millions of dollars annually.

"This is a problem that affects everyone, but most people don't know about it," Cordray said in a prepared statement. "By cutting corners, some employers are in effect stealing from the rest of us. Through unemployment compensation, Bureau of Workers' Compensation premiums and state income tax revenues, state and local governments in Ohio are losing hundreds of-millions of dollars each year. This is inexcusable in any economic environment, but absolutely unforgivable today. It is time to level the playing field for those businesses that play by the rules."

In a move to prevent misclassification, the Ohio Department of Job and Family Services, Ohio Department of Taxation and Ohio Bureau of Workers' Compensation joined forces in an agreement to release and exchange information. The agreement is believed to be the first of its kind in the state and emphasizes the commitment of Ohio leaders to hold accountable those abusing the system, according to Cordray's announcement.

The agreement is the culmination of six months of work by a task force led by Cordray.

A report compiled by the Attorney General's Office estimates that the extent of annual costs from worker misclassification may be $100-million for unemployment compensation, more than $510-million in BWC premiums and almost $180-million in forgone state income tax revenues.

Additionally, misclassification is estimated to have cost Ohio cities and villages more than $100-million in local income tax revenues in 2006, and cost school districts $7.8-million in 2008.