The Tennessee Department of Labor is hopeful that a $300,000 fine for misclassifying construction workers is a deterrent to other employers who are considering breaking that law.

The penalty, which was imposed last month, reflected a statewide effort to stop employers from illegally classifying full-time employees as contract workers. It’s the largest such penalty so far, and state Labor Department officials say the practice is widespread in the construction industry.

Workers who aren’t classified as employees miss out on the benefits and protections of that status, including overtime pay and coverage for work-related injuries.

The guilty company, TJ Drywall of Nashville, was earning $2 million a year but paying only 5% of what regulators said it owed for workers’ compensation and unemployment insurance premiums. Employers don’t pay those premiums for contract workers, only employees.

Another construction business voluntarily reclassified its “contract” workers when it became aware of the huge amount levied against TJ Drywall. The fine money goes toward hiring more investigators to root out companies that misclassify employees.

Said one state labor official, “It upsets me when somebody who is following the rules – paying their insurance, paying their taxes like they’re supposed to. And they’re trying to compete with people who aren’t withholding any of that or paying for any of the benefits for somebody who is in fact an employee.”

Read the whole story on NashvillePublicRadio.org.