Worker Classification Update

Posted by National Alliance for Fair Contracting on

J.D.Supra
Labor & Employment Law, Taxation
July 26, 2017

On July 20, 2017, the Internal Revenue Service (“IRS”) issued a reminder for small businesses on the importance of correctly classifying workers as employees or independent contractors. Employers failing to do this correctly may face penalties, including trust fund penalties, from the IRS, which can be assessed not only against the employer but also against officers and directors. Classification is important because an employer must withhold income taxes and pay Social Security, Medicare taxes, and unemployment tax on wages paid to workers who are employees, but independent contractors are instead subject to self-employment tax.

Employers must look at the facts in each situation. The IRS has reminded small businesses to focus on three categories to properly classify workers: (1) behavioral control, (2) financial control, and (3) the relationship of the parties. A worker is properly classified as an employee if the employer exercises significant behavioral and financial control over the worker such as controlling the manner of work by giving the worker instructions or training and providing the worker with the tools necessary to complete the work. Also, if the employer and the worker have a permanent working relationship and the employer provides the worker with benefits such as a pension plan or vacation pay, the worker properly would be classified as an employee. On the other hand, a worker should be treated as an independent contractor if the worker has autonomy on deciding the manner of work and amount of hours to work, works for multiple employers, or does not retain a permanent relationship with the employer. These factors all reflect a 20-factor test established by the IRS in Revenue Ruling 87-41.2

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D.C. ‘Rolled Out the Red Carpet’ for a Company Accused of Wage Fraud

Posted by National Alliance for Fair Contracting on
Councilmember, others call foul.

 

Jeffrey Anderson
JUL 27, 2017 – 5 AM

With the building boom unabated, one issue D.C. voters can expect to hear a lot about come election year is jobs. Every public land sale, commercial project, mixed-use development, or residential complex comes with mayoral promises of opportunities for a growing labor force.

But the D.C. Apprenticeship Council’s recent certification of an out-of-state contractor and accusations of wage fraud have prompted an investigation by Attorney General Karl Racineand claims by unions and labor advocates that a bad actor is going unchecked. At-large D.C. Councilmember Elissa Silverman worries that the District isn’t enforcing its own labor laws.

“We don’t want to be approving apprenticeships for companies that don’t follow the law, don’t pay employees a fair wage, and engage in bad labor practices,” she says. “We don’t want to rely on bad actors to train employees.”

The apprenticeship council is an 11-member body within the Department of Employment Services that is supposed to ensure compliance with local and federal labor laws and standards. In order to bid on major projects, contractors must have a certain number of licensed skilled workers and apprentices on the job. Certification as an apprenticeship sponsor helps contractors compete for those projects.

Certifying companies that fail to meet wage and overtime standards, labor sources say, is a disincentive for those companies to properly classify and train electricians, plumbers, and drywall and HVAC installers. Profit margins become irresistible to unscrupulous contractors at the expense of workers who are underpaid and struggling to advance in their trades.

Power Design, a Florida-based electrical contractor, received certification from the apprenticeship council last month. The firm has contracts at 16 major building sites in D.C., some publicly funded and most run by the city’s top construction companies. Clark Construction and its related CBG Building Company have hired the firm as an electrical contractor at six of those sites. Other major companies such as Hitt Construction, Davis Construction, Donohoe Construction, and Walsh Construction have also hired Power Design.

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Labor Commissioner’s Office Files $6.3 Million Misclassification and Wage Theft Lawsuit against Glendale Construction Company (CA)

Posted by National Alliance for Fair Contracting on
PR Newswire

Aug. 14, 2017, 01:55 PM

LOS ANGELES, Aug. 14, 2017 /PRNewswire-USNewswire/ — The Labor Commissioner’s Office has filed a lawsuit against Calcrete Construction, Inc. seeking $6,300,338 for multiple wage theft violations affecting a group of 249 construction workers and the willful misclassification of 175 workers as independent contractors.

An investigation launched in October 2016 uncovered the Glendale-based company’s failure to pay the workers for overtime hours, allocate pay for sick leave and provide proper wage statements. The lawsuit, filed in Los Angeles Superior Court, also seeks civil damages and penalties.

Beginning in August 2016, Calcrete forced its workers under threat of termination to sign contracts stating they were independent contractors. The company then used staffing agencies Dominion Staffing and Southeast Personnel Leasing to pay the workers.

“It is illegal for employers to use subcontractors to distance themselves from the obligation to pay workers, and we will use every tool to dissuade employers from this scheme,” said Labor Commissioner Julie A. Su. “This lawsuit aims to recover the money these misclassified workers should have been paid after years of wage theft.”

Calcrete employees typically worked 10-12 hours Monday through Friday and eight hours on Saturday. They were paid only their regular hourly rate and not for the 18-28 hours of overtime they regularly worked. This underpayment occurred for a nearly two- year period from 2014-16, the lawsuit specifies.

The lawsuit seeks:
  • Wages and damages of approximately $2,596,438 payable to the workers:
    • $352,000 in overtime wages
    • $1,244,438 in waiting time penalties
    • Over $1,000,000 (specific amount to be determined at trial) for unpaid sick leave and liquated damages
  • Penalties of approximately $3,703,900 payable to the state:
    • $2,625,000 in statuary penalties for willful misclassification
    • $78,900 in civil penalties.
    • Over $1,000,000 (specific amount to be determined at trial) for failure to provide proper wage statements

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Labor Commissioner’s Office Cites Oakland Construction Company Over $3.5 Million for Wage Theft Violations (CA)

Posted by National Alliance for Fair Contracting on

NEWS PROVIDED BY
California Department of Industrial Relations
Jul 25, 2017, 15:43 ET

OAKLAND, Calif., July 25, 2017 /PRNewswire-USNewswire/ — The Labor Commissioner’s Office cited an Oakland contractor more than $3.5 million in wages and penalties for multiple wage theft and labor law violations. Attic Pros is ordered to pay $2,109,480 in wages, liquidated damages and waiting time penalties for 119 workers who were misclassified as independent contractors, and $1,481,600 for civil penalties.

“This is an egregious case of wage theft, with workers misclassified and denied a just day’s pay,” said Labor Commissioner Julie A. Su. “My office enforces California’s labor laws to stop employers willing to cheat employees of their pay as a means to gain an unfair advantage over their law-abiding competitors.”

The Labor Commissioner’s Office launched its investigation of the company and its owner, Leonid Molchanov, after receiving a Private Attorneys General Act claim. Investigators found that Attic Pros’ employees worked 10-14 hours per day up to six days a week, and were paid a daily rate regardless of the actual number of hours worked-putting their earnings below minimum wage.

Su ordered Attic Pros to pay $191,400 in unpaid minimum wages, $321,330 in unpaid overtime wages, $191,400 in liquidated damages on unpaid minimum wages, $1,405,350 in waiting time penalties, and $1,481,600 in civil penalties for minimum and overtime wage violations, wage statement violations and employee misclassification. The citations were issued for violations that occurred during the 32-month period from July 2014 to March 2017.

When workers are paid less than minimum wage, they are entitled to liquidated damages that equal the amount of underpaid wages plus interest. Waiting time penalties are imposed when the employer fails to provide workers their final paycheck after separation. This penalty is calculated by taking the employee’s daily rate of pay and multiplying it by the number of days the employee was not paid, up to a maximum of 30 days. The civil penalties collected will be transferred to the State’s General Fund as required by law.

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Opinion Build more affordable housing, but don’t stiff construction workers in the process (CA)

Posted by National Alliance for Fair Contracting on
Robbie Hunter, Sacramento
The writer is president of the State Building Construction and Trades Council of California.

July 17, 2017, 9:10 am

To the editor: Your editorial is wrong to suggest that removing the requirement in SB 35 that workers be paid the prevailing wage – the common wage paid to construction workers in any given area – will somehow ease the affordable housing crisis in California. Instead, it would help drive more than 400,000 construction workers and their families out of the shrinking blue-collar middle class. Try supporting a family of four in California on a residential construction worker’s average pay of around $42,000 on prevailing wage projects. (“Affordable housing at an impasse,” editorial, July 22)

Removing the prevailing wage mandate would force the families of plumbers, carpenters and other construction workers to compete in the underground economy where developers hire workers from street corners and pay no state or federal tax, no Social Security, no Medicare and of course no benefits. We cannot obtain affordable housing by driving millions more Californians into poverty.

Labor makes up about 15% of the total cost of any given prevailing wage residential project. Construction workers are not driving the housing shortage. The real culprit is the greed of developers and speculators. We see no editorials to curtail their massive profits.

Does anyone really believe that the money saved from restricting construction workers’ pay will wind up anywhere other than in developers’ pockets?

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Opinion: Writers offered bogus info for ‘answers’ to housing crisis (CA)

Posted by National Alliance for Fair Contracting on

By ROBBIE HUNTER |
PUBLISHED: July 24, 2017 at 11:07 am
UPDATED: July 25, 2017 at 4:27 am

Too bad that John Gamboa and Herman Gallegos didn’t dig a little deeper before they did the bidding of greedy developer/speculators in their July 7 column on California’s housing crisis.

If they would have looked around in their own back yard in the Bay Area, they would have found some real research instead of having to regurgitate the misleading information that the California Center for Jobs & The Economy spoon-fed to them as a “study.”

A study it wasn’t. Instead, the center’s report cherry-picked a few numbers out of some tired old statistical abstractions to trash the idea of paying decent, middle-class wages to construction workers.
If Gamboa and Gallegos wanted real information, they should have checked with the Mountain View City Council, which in 2013 asked its staff to look into a real-world prevailing wage project. The city’s analysis determined that the use of the prevailing wage added 10 percent to the cost of a taxpayer-subsidized, 51-unit Franklin Street Family Apartments complex.

Mountain View’s staff report relied on numbers that came straight from the developer. Gamboa and Gallegos, on the other hand, lifted some of the most CCJE’s most ridiculous readings of the prevailing wage’s impact to predict outlandish rises in housing prices, rents and poverty. They got it wrong.

The bottom line on the prevailing wage is that the higher productivity of a highly-skilled and trained work force keeps added labor costs manageable – about 4 percent, according to the research of SmartCitiesPrevail.org. And that’s before you add in the social cost savings when construction workers and their families don’t have to obtain food stamps or MediCal to survive.

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Democratic leaders: Prevailing wage is good for Delaware (DE)

Posted by National Alliance for Fair Contracting on

Senators David McBride, Margaret Rose Henry and Nicole Poore
Published 2:07 p.m. ET July 21, 2017
Updated 2:33 p.m. ET July 21, 2017

The 2017 budget debate is behind us, and plenty of page space in this publication and others has been committed to its finer details. We’re perplexed, though, by how much of the Republican dialogue continues to be dominated by an issue completely peripheral to the budget: the prevailing wage paid to blue-collar workers on public works projects.

Partisan misinformation has clouded the truth surrounding both the budget and the prevailing wage. We believe that the public deserves a discussion that cuts through political spin and cocktail napkin math and offers a straightforward inventory of the facts.

Prevailing wage laws ensure fairness in government contracts by basing laborers’ total compensation on a survey of similar workers in their area, just as anyone would expect wages commensurate with their skills, occupation, and cost of living.

You may have heard some of the following myths:

Myth: The prevailing wage is a budget issue that affects the $354 million deficit closed by the General Assembly earlier this month.

Fact: Public works projects are funded almost entirely by the capital budget, or “bond bill,” a completely separate balance sheet. Our operating deficit was caused by a unique combination of factors: growing public school enrollment, special education costs, national health care prices, and a tax portfolio that works more like a scratch-off ticket than a speedometer for our economy. Our colleagues across the aisle who sit on the budget-writing Joint Finance Committee are perfectly aware of that fact.

Myth: Reducing or repealing the prevailing wage would lower public construction costs by as much as 24 percent.

Fact: Multiple studies and real-world examples show that this is simply untrue. States that slash public works wages rarely realize the cost savings that are promised in campaign years, while middle class wages tumble and the economy suffers. That actually does hurt the state’s bottom line.

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Wilmington-Based Electrical Company Cited $100K+ (DE)

Posted by National Alliance for Fair Contracting on

The AG’s Office zeroed in on the company, which dissolved in 2016.

 

By Mike Carraggi (Patch National Staff)
Updated August 9, 2017 12:31 am ET

WILMINGTON, MA – A Wilmington-based electrical company was cited more than $100,000 in restitution and penalties for not properly paying employees working to repair streetlights in Worcester, Attorney General Maura Healey announced today. …

Wilmington Wiring Corporation and owner John Garrett had three civil citations issued against it for failure to pay the prevailing wage, failure to furnish payroll records, and failure to furnish certified payroll records to the AG’s Office.

“Prevailing wage laws ensure workers are paid a real, living wage, and level the playing field for companies that play by the rules,” said Healey. “Workers, honest employers, and taxpayers lose when companies fail to follow wage and hour laws.”

WWC was based in Wilmington until it dissolved in May 2016. The AG’s Office began investigating the company in January of that year after an employee filed a complaint alleging he was not paid the prevailing wage rate for five years of work on a public project repairing streetlights in Worcester, the AG’s Office said. An investigation revealed six employees were not paid proper prevailing wage for the public works project; only WWC union employees were. WWC also then ignored the AG’s Fair Labor Divison’s payroll demands, the AG’s Office said.

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Are Georgia firms cheating 1,000s of workers out of benefits, health care? (GA)

Posted by National Alliance for Fair Contracting on

By Jon Greenberg on Thursday, August 10th, 2017 at 2:51 p.m.

With health care policy in limbo in Washington, the politicians who would like to be Georgia’s next governor are staking out their own policy outlines. Democratic State Rep. Stacey Evans favors expanding Medicaid, but said the state could take other action as well.

“There are thousands of Georgia workers that are misclassified as independent contractors, so that their employers can wrongfully deny them the benefits that they deserve, including health care,” Evans said Aug. 5. “By expanding Medicaid and classifying workers appropriately, insurance will be available to hundreds of thousands more Georgians.”

We decided to check Evans’ number of misclassified workers, and found she’s on safe ground.

Defining misclassification

Some businesses avoid treating workers as employees by calling them an independent contractor. The person might work only for that one business, use equipment the business provides and do exactly what the business tells him or her to do, and yet be labeled as if the person was in business for themselves.

The advantage for companies is they avoid paying a number of employment taxes, including Medicare, Social Security and unemployment insurance. If they offer health insurance, they would sidestep that too.

As Georgia’s Department of Labor put it, “independent contractors are not independent just because that is what their employer calls them, because that is what they call themselves, or because they sign an ‘independent contractor agreement.’ Independent contractor status depends on the underlying nature of the work relationship.”

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How we investigated wage enforcement at the Illinois Department of Labor (IL)

Posted by National Alliance for Fair Contracting on

By Matt Kiefer | August 9, 2017

“There ought to be a law.”

We throw that phrase around casually in our civic discourse. But sometimes a new law passes that doesn’t make a dent in the problem, as reporter Melissa Sanchez found when she looked into the bleak and arduous process of filing a wage theft claim in Illinois.

Long wait times and high dismissal rates are nothing new at the Illinois Department of Labor, where every year thousands of workers file grievances against employers who have allegedly shorted their pay. A 2012 Reporter investigation, “Waiting in Vain”, revealed the average wage theft claim took about seven months to resolve, with 41 percent ending up dismissed.

Five years on, the Reporter followed up on this story to see how things worked out. It took half a dozen Freedom of Information Act requests and several months of delays, denials and appeals before the department handed over all the wage complaint and other operational records we requested.

Our findings: Wait times for wage theft cases had increased to nine months and dismissal rates jumped to 58 percent. The promised reforms didn’t deliver.

To do our analysis, we loaded the records into a Django database, which is handy for sorting, filtering and looking up related records. When calculating case durations and dismissal rates for wage complaints, we narrowed the record set to wage complaints filed in 2014 due to the volume of pending cases in subsequent years that had unknown resolution dates and outcomes. (Other calculations, such as those counting case volume by year, or the total amount of wages claimed, include all available complaint data.)

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