US Labor Department signs agreement with New Hampshire Department of Labor to reduce misclassification of employees

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WHD News Release: [11/12/2014]

WASHINGTON – Officials from the U.S. Department of Labor and the New Hampshire Department of Labor  has signed a memorandum of understanding with the goal of protecting the rights of employees by preventing their misclassification as something other than employees, such as independent contractors or other nonemployee statuses.

Under this agreement, both agencies will share information and coordinate law enforcement. The memorandum of understanding represents a new effort on the part of the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. The New Hampshire Department of Labor is the latest state agency to partner with the Labor Department.

“Misclassification of employees deprives workers of rightfully-earned wages and workplace protections and undercuts law-abiding businesses,” said U.S. Secretary of Labor Thomas E. Perez. “Which is why combating misclassification is one of several important strategies to promote shared prosperity to help ensure that our economy works for everyone.”

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US Labor Department signs agreement with Alabama Labor Department to reduce misclassification of employees

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WASHINGTON – Officials of the U.S. Department of Labor’s Wage and Hour Division and the Alabama Department of Labor today signed a memorandum of understanding to protect the rights of employees by preventing their misclassification as something other than employees, such as independent contractors. The memorandum of understanding represents a new effort on the part of the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. The Alabama Department of Labor is the latest state agency to partner with the U.S. Labor Department.

In Fiscal Year 2013, WHD investigations resulted in more than $83,051,159 in back wages for more than 108,050 workers in industries, such as janitorial, food, construction, day care, hospitality and garment. WHD regularly finds large concentrations of misclassified workers in low-wage industries.

“Misclassification deprives workers of rightfully-earned wages and undercuts law-abiding businesses,” said Dr. David Weil, administrator of the Wage and Hour Division. “This memorandum of understanding sends a clear message that we are standing together with the state of Alabama to protect workers and responsible employers and ensure everyone has the opportunity to succeed.”

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$10.2M awarded to fund worker misclassification detection, enforcement activities in 19 state unemployment insurance programs

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WASHINGTON – The U.S. Department of Labor today awarded $10,225,183 to 19 states to implement or improve worker misclassification detection and enforcement initiatives in unemployment insurance programs.

“This is one of many actions the department is taking to help level the playing field for employers while ensuring workers receive appropriate rights and protections,” said U.S. Secretary of Labor Thomas E. Perez. “Today’s federal grant awards will enhance states’ ability to detect incidents of worker misclassification and protect the integrity of state unemployment insurance trust funds.

 

2014 Worker Misclassification Grants

State Regular High Performance Bonus  Total
California $499,792 $499,792
Delaware $27,672 $27,672
Florida $31,792 $31,792
Hawaii $500,000 $500,000
Idaho $500,000 $500,000
Indiana $500,000 $500,000
Maryland $494,600 $400,099 $894,699
Massachusetts $499,800 $499,800
New Hampshire $330,468 $330,468
New Jersey $342,222 $496,399 $838,621
New Mexico $499,970 $499,970
New York $500,000 $500,000
Oregon $500,000 $500,000
South Dakota $500,000 $500,000
Tennessee $499,260 $499,260
Texas $500,000 $775,529 $1,275,529
Utah $500,000 $327,973 $827,973
Vermont $500,000 $500,000
Wisconsin $499,607 $499,607
Totals $8,225,183 $2,000,000 $10,225,183

 

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Labor Department announces grants to fight tax cheats

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WASHINGTON – The U.S. Department of Labor on Monday awarded $10.2 million to nearly two dozen states to beef up enforcement of a labor scheme that companies employ to evade their tax obligations.

The announcement of the first-of-their-kind grants comes one week after McClatchy’s five-part series that uncovered the federal government’s failure to stop companies that wrongly classify their workers as independent contractors instead of employees on federal contracts.

Labor Secretary Tom Perez said the grants, which range from $28,000 to $1.3 million, will help states identify and stop so-called worker misclassification and protect state unemployment insurance benefits.

“This is one of many actions the department is taking to help level the playing field for employers while ensuring workers receive appropriate rights and protections,” Perez said in a statement.

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(Related Link – McClatchy’s “Contract to Cheat”)

Legislation Would Go After Employers Who Misclassify Workers to Avoid Benefits

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A state lawmaker says Pennsylvania regulators are coming up short when it comes to enforcing a 2010 state law intended to target companies that misclassify their workers as independent contractors.

State Senator Mike Stack (D-Philadelphia) said there is room in the economy for independent contractors, but, “there is obvious abuse of the classification which denies employees rights, benefits and protections accorded under labor laws.”

Under Act 72, independent contractors are supposed to use their own tools and equipment and should not be under the direct supervision of their employers.

The law outlines penalties for misclassifying workers, but Stack said the commonwealth is not adequately enforcing the law

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How New York and Illinois Curb a Key Labor Violation While Other States Fall Short

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This story is part of the series called “Contract to Cheat” published by McClatchy DC. The series tracks how several states fail to prevent construction companies doing public projects from misclassifying their workers as independent contractors 2014 a practice that cheats taxpayers out of billions of dollars each year and denies workers protections.

Read the entire series on McClatchy’s site

On an overcast July afternoon, with the clock ticking on their lunch break, men in blue jeans and hard hats filed out of the four-story Fairfield Inn & Suites under construction near Interstate 270.

Jon Gould, a Carpenters Union job site investigator, stood in the parking lot of a nearby filling station and gazed at the half-finished motel. Three months earlier, on a hunch, investigators from Gould’s union had started videotaping the people building the motel.

The surveillance was taking place to answer a big question: Was Road Runner Construction, of Little Rock, Ark., the motel framing contractor, trying to get away with a practice known as misclassification? Repeated countless times nationwide, often with impunity, the practice enables dishonest companies to underbid honest competitors by categorizing employees as independent contractors-thereby dodging laws that require the payment of state and federal taxes.

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Misclassification Robs Workers of Pay and Benefits, Hurts Honest Companies

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News today on the misclassification of construction employees and recent court decisions in Oregon and California that FedEx’s employees are not independent contractors are reminders that misclassification of workers is rampant in this country and that misclassification hurts workers, honest companies, and government at every level.

“Companies have put more and more risk, responsibility, and cost on their employees-requiring employees to pay their own employment taxes, to do without worker’s comp coverage, to pay for their own uniforms, and to rent the tools they need to work,” said EPI’s Vice President Ross Eisenbrey, who has studied misclassification since the 1990’s. “Misclassification robs workers of fair pay and benefits, and contributes to an economy where wages are flat, profits are soaring, and CEOs and top brass get the lion’s share of pay increases. Meanwhile, the companies that do not arrange their business to avoid their employment responsibilities are disadvantaged. It’s not just bad labor practices, it is unfair competition.”

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Misclassified Employees Force Taxpayers To Subsidize Costs, Harm Economy

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CHICAGO – Illinois employers wrongly classified nearly 20,000 of their workers as independent contractors rather than full-time employees in 2013, skipping out on more than $250 million in wages and contributions to funds that support laid-off and injured workers, the Illinois Department of Employment Security said today.

Taxpayers ultimately cover the costs of misclassified workers because it robs the state of payroll taxes normally removed from a worker’s paycheck. Those funds typically are not removed from payments given to independent contractors. In some cases, a homeowner could be responsible for costs incurred if a misclassified worker is injured while working on the owner’s dwelling.

“The consequences of misclassification are easy to see when a worker is hurt or an honest business owner is under-bid for a project. What hides in plain sight are the socialized costs that occur when a dishonest employer deceives a customer and cuts corners by not playing by the rules,” IDES Director Jay Rowell said.

“The labor movement is about creating strong communities and protecting workers from unscrupulous employers,” said Chicago Federation of Labor President Jorge Ramirez. “Tactics like worker misclassification erodes that by violating workers’ employment and labor rights.”

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(PDF Release)

VA Governor Signs Executive Order Establishing Inter-Agency Task Force on Worker Misclassification

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Governor Terry McAuliffe has signed Executive Order 24 establishing an interagency task force on worker misclassification and payroll fraud.

“Every Virginian who works hard and follows the rules should get the pay and benefits that they deserve,” said Governor McAuliffe “This executive order will begin a process to ensure that employers throughout the Commonwealth follow the same rules when it comes to benefits and pay for their employees.”

The text of executive order number 24 is as follows:

 Importance of the Issue

The misclassification of employees as “independent contractors” undermines businesses that follow the law, deprives the Commonwealth of millions of dollars in tax revenues, and prevents workers from receiving legal protections and benefits.

A 2012 report of the Joint Legislative Audit and Review Commission (JLARC) found that one third of audited employers in certain industries misclassify their employees. By failing to purchase workers’ compensation insurance, pay unemployment insurance and payroll taxes, or comply with minimum wage and overtime laws, employers lower their costs up to 40%, placing other employers at a competitive disadvantage.

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Mass. to Expand Its Already Powerful and Effective Wage and Misclassification Task Force

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Six years after Massachusetts Gov. Deval Patrick created the Joint Task Force on the Underground Economy (JTF) via executive order, the highly successful program will become statute thanks to language in the state’s newly enacted minimum wage law.

Recent reports show that in 2013 alone the JTF recovered $15.6 million in back wages, unemployment insurance premiums, penalties and fines following over one thousand investigations.  Since its inception, the JTF has recovered over $56 million.

Executive Office of Labor and Workforce Development (EOLWD) Secretary Rachel Kaprielian said in a statement:

“Companies and individuals who willfully avoid the law by misclassifying employees … or engage in fraudulent employment practices of the underground economy put workers’ safety at risk, place legitimate businesses at a disadvantage and burden taxpayers.”

A new council will take the reigns from the JTF, adding eight agencies to those that have been on board since 2008.  Gov. Patrick is currently in the process of selecting these new agencies.  The new council will be chaired by the Secretary of Labor and Workforce Development and will have broadened powers.