Louisiana Ramps Up Effort to Stop Worker Misclassification
State and federal government entities that have been partnering since 2013 on a Louisiana task force targeting employers who misclassify workers plan to increase their efforts next year, according to the Louisiana Workforce Commission (LWC).
The LWC’s Unemployment Insurance and Office of Workers’ Compensation divisions and the Louisiana Department of Revenue, with cooperative agreements with the Internal Revenue Service and the U.S. Department of Labor’s Wage & Hour Division are telling companies that if they misclassify workers, then it is GAME ON.
GAME ON is the acronym for Government Against Misclassified Employees Operational Network, a unique task force found only in Louisiana.
“We are putting companies on notice that misclassifying workers won’t be tolerated in Louisiana,” said LWC Executive Director Ava Dejoie in the agency’s release. “The practice isn’t fair to the unsuspecting workers who are cheated out of critical benefits and protections, and it’s not fair to the thousands of businesses who ‘play by the rules’ but are undercut by companies that intentionally trim labor costs by misclassifying.”
Misclassification refers to a worker who by law is an employee, but is incorrectly classified as something other than an employee. Most misclassifications usually involve workers labeled as independent contractors.
The GAME ON task force is focusing efforts on the industries historically known to use independent contractors to a large degree, namely construction, healthcare, hospitality, personal services and staffing companies.
When a worker is classified as an independent contractor, a company does not have to provide benefits and protections as outlined by law, such as minimum wage, overtime compensation, family and medical leave, unemployment insurance, workers’ comp and safe workplaces. It has been estimated that companies that misclassify workers as independent contractors shave as much as 40 percent off their labor costs.
“Labor brokers,” a new staffing practice in Louisiana often seen in the construction and health care industries, is another way employers skirt the law, said Dejoie. For example, contractors will work with labor brokers to get temporary manpower for short-term jobs. The workers technically were recruited and hired by the labor broker, but work for the contractor. The contactor gets the needed labor without having to pay unemployment taxes, Social Security, FICA, workers’ compensation or overtime pay, among other benefits.
In 2015, using shared information from the task force agencies and tips from a fraud hotline, LWC’s tax auditors discovered nearly 20,000 cases of misclassified workers, representing $101 million in unreported wages. That effort resulted in the LWC’s Audit Program being honored by the U.S. Department of Labor as the most effective audit program in the country.
“We are ramping up our efforts even more in 2018,” said Dejoie.
The LWC is implementing audit software that features built-in analytics to help identify suspect companies. The phased-in program will also streamline the audit process, allowing LWC’s auditors to investigate more companies in less time.
In addition to having to pay taxes on unreported wages, companies with identified “willful” offenses of misclassified workers face financial penalties of up to $1,000 per offense, with each misclassified employee considered a separate offense. Incidences of multiple offenses can also result in imprisonment, and offending employers are barred from receiving state or government contracts.