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Independent Contractor Misclassification and Compliance News: August, 2019

   |   Nathan Gibson   |   August 30, 2019

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As the independent workforce continues to grow, so do the issues of worker compliance and misclassification. It is important for enterprises to remain informed about the latest laws, regulations, and developments surrounding these topics. Each month, we’ll bring you the latest news stories from around the web.

1. New Jersey Wage Theft Act

New Jersey enacted the New Jersey Wage Theft Act that expanded employee protections, increased fines and penalties and lowered the burden of proof. The new law increases fines and penalties for failing to pay wages, benefits, or overtime, extends the statute of limitations for wage claims, broadens the claims that can be brought through class actions, and requires employers to provide a statement of their rights among other requirements.

The new law also makes employers and labor contractors jointly and severally liable for claims including wage and hour claims and retaliatory actions. A labor contractor is an “entity that supplies, either with or without a contract, directly or indirectly, a client employer with workers to perform labor or services within the client employer’s usual course of business, except that ‘labor contractor’ does not include a bona fide labor organization or apprenticeship program, or a hiring hall operated pursuant to a collective bargaining agreement.”

The new law increases the risks of and penalties for noncompliance but does not impose new compliance obligations. For companies that engage with independent contractors, the new law does not change the standard for classifying a worker as an employee or independent contractor. However, most claims that a worker was misclassified include wage claims and this law increases the fines and penalties for wage claims and therefore companies should ensure that workers are properly classified.

2. Michigan Attorney General Focuses on Payroll Fraud Enforcement

In April, Michigan Attorney General Dana Nessel established a Payroll Fraud Enforcement Unit that to focus on payroll fraud and misclassification. The unit was set up to investigate claims with the assistance of other departments and agencies and take appropriate actions to deliver meaningful remedies to the workers of Michigan. Since launching her Payroll Fraud

Enforcement Unit in April, Nessel’s office has received nearly 100 complaints of payroll fraud through its tip line and website.

Recently, the Attorney General said she is preparing to file criminal and civil charges as part of her office’s efforts to safeguard Michigan workers and combat payroll fraud in Michigan.

Payroll fraud complaints can include filing to pay overtime, paying workers under the table to avoid payroll taxes and misclassifying workers as independent contractors. Companies who engage with independent contractors in Michigan should make sure that their independent contractors are properly classified.

3. Wisconsin Focus on Worker Classification

In April, Wisconsin Governor Tony Evers issued an executive order establishing a task force on worker misclassification and payroll fraud. The task force was set up to coordinate worker misclassification complaints. Worker misclassification is suspected to be prevalent in the construction industry in Wisconsin.
Governor Evers recently make appointments to the task force. The task force will develop recommendations on how to reduce payroll fraud and misclassification in Wisconsin.

For more information, check out our resources page on misclassification and compliance, or contractor engagement best practices. If you have any questions about engagement, classification, or management of your independent workforce, we’re always here to help.

Nathan Gibson

Senior Director, Risk Management