A broader and more streamlined crackdown on worker misclassification is coming in Louisiana, where the state’s workforce commission is beefing up efforts to deal with the problem in 2018. The Louisiana Workforce Commission says the Government Against Misclassified Employees Operational Network, or GAME ON initiative, is “a unique task force found only in Louisiana.”
“We are putting companies on notice that misclassifying workers won’t be tolerated,” said the agency’s executive director Ava Dejoie.
“Partnering together are the Louisiana Workforce Commission (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,” the workforce commission said in a news release.
“We are ramping up our efforts even more in 2018,” said Dejoie. “The LWC is in the process of implementing audit software that features built-in analytics to help identify suspect companies,” the agency said, adding that 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,” the agency said.
“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,” Dejoie said.
As Construction Citizen readers are well aware, worker misclassification happens when companies pretend workers are “independent subcontractors” when, by law, they should be classified as employees and compensated as such. There are many legitimate uses of contract labor, of course. The problem arises when unethical companies use the designation to avoid payroll taxes and benefits allowing those firms to underbid law-abiding companies by as much as 35 percent.
Dejoie also pointed to so-called “labor brokers” as “a new staffing practice in Louisiana often seen in the construction and health care industries. It is “another way employers skirt the law,” Dejoie said. “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 contractor gets the labor he needs without having to pay unemployment taxes, Social Security, FICA, workers’ comp or overtime pay, among other benefits,” the agency said.
However, “contractors should take caution and ensure that their (labor broker) subcontractors are properly licensed, insured, and are paying the appropriate payroll taxes on their crews,” said Dejoie. “Failure of the subcontractor to comply with state and federal laws may result in the general contractor becoming liable for such payments.”
“If we find questionable hiring practices in a company one year, we will expand our audit to previous years as well,” she said, adding that officials will go back as far as four years looking for violations.
State officials said that while the task force effort only recently received its GAME ON name, the agencies have been working together since 2013 after the Louisiana Legislature passed the Fair Play Act.
For the last several years, LWC’s tax auditors have led the nation in audit-based discoveries of misclassified workers, the agency said. They were able to use shared information in 2015 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,” agency officials noted.