“A contractor who doesn’t do it right can bid lower than those who do.” – Louisiana Legislative Auditor Daryl Purpera
By Sue Lincoln
June 26, 2019
From the time in early 2016 that newly-minted Gov. John Bel Edwards signed his first executive order accepting Medicaid expansion, arch-conservatives in the state legislature have been sounding alarms over purported fraud in the program. And when Louisiana Legislative Auditor Daryl Purpera addressed the Baton Rouge Press Club on Monday, June 24, he didn’t hesitate to wax eloquent on that topic. In particular, Purpera reiterated his “need” to access taxpayer-specific Department of Revenue information. The Revenue Department has refused to provide that data, and presently the Auditor is suing them for it, asking the courts for a declaratory judgment that will authorize release of the information.
In addition to the cause celebre of alleged Medicaid fraud, Purpera also had a few things to say about a new performance audit issued earlier in the day, which looks at how the Louisiana Workforce Commission is handling the problem of “misclassified workers”.
“Our audit samples, covering 2014 through 2018, showed employers misclassifying workers failed to pay nearly $3-million in unemployment taxes,” Purpera told the Press Club. “In addition, they failed to collect and remit an estimated $9-million of state income tax from these workers.”
This isn’t about putting someone on the payroll as a receptionist when she is actually performing the duties of a secretary, to cover up for paying her less. Nor is it about designating a busboy as a waiter, so that instead of paying him $7.25 per hour, you can get away with paying him just $2.13. Instead, as stated in the audit, “Worker misclassification occurs when an employer improperly classifies a worker as an independent contractor instead of an employee.”
An employee is subject to payroll withholding of taxes, and is eligible for employment benefits such as insurance. An independent contractor is instead paid a flat amount, and is responsible for paying his or her own taxes and/or insurance.
“This is pervasive in some industries,” Purpera stated. “Construction particularly.”
Federal law requires each state’s labor agency to annually audit one-percent of all employers and one-percent of total employee wages, and this report notes the Louisiana Workforce Commission is in full compliance with that rule. In fact, LWC is ranked 2nd in the nation for its employer audit program. This legislative audit also states LWC consistently found the more misclassified workers within construction companies than within other types of employers: on average, 12 workers for each construction firm audited. From 2016 through 2018, 453 audits of construction companies (15.4% of the total number of employer audits reviewed) revealed 5,493 misclassified workers (or nearly 42% of all the 13,106 workers determined to be misclassified.)