Insurance Fraud NEWS
Louisiana Workforce Commission puts employers on notice – Don’t misclassify workers
July 20, 2018, Baton Rouge, LA
Teaming with partner agencies, the Louisiana Workforce Commission (LWC) conducted unannounced site inspections today as the agency ramps up efforts to combat the unethical business practice of misclassifying workers.
“Unannounced site inspections will continue until the unfair business practice of misclassifying workers stops,” said LWC Secretary, Ava Dejoie. “Our message is clear – misclassifying workers will not be tolerated in our state.”
Construction sites in the New Orleans area were inspected by unemployment insurance tax auditors and workers' compensation authorities from LWC, as well as other agency representatives from GAME ON. The unannounced inspections were based on credible tips received by task force members.
GAME ON is the acronym for Government Against Misclassified Employees Operational Network, a statewide, multi-agency task force organized last year to fight the problem of misclassified workers. Members of the task force along with the LWC are the Louisiana Department of Revenue (LDR), the U.S. Department of Labor's Wage and Hour Division and the Internal Revenue Service (IRS).
Results from the unannounced inspections will take several weeks to finalize. Over the past year, the LWC has focused efforts to curb worker misclassification, primarily through its Unemployment Insurance Field Tax Audit unit. Since July 1, 2017, field auditors have completed nearly 1,000 audits of companies, uncovering more than 3,3000 misclassified workers.
“The 3,300 misclassified workers resulted in more than $11 million in unreported taxable wages and hundreds of thousands of dollars in unpaid unemployment taxes,” Secretary Dejoie said. “This practice creates a financial disadvantage to those companies that are complying with employment and payroll laws.”
The misclassification of workers is particularly prevalent in the construction industry where labor brokers and contractors routinely and deliberately classify their workers as independent contractors and add to their profit margin by failing to deduct withholdings or pay unemployment taxes, by not paying federally mandated overtime compensation, and also not securing workers' compensation coverage. Labor brokers and contractors say the workers they use are independent contractors, not employees. “But, simply calling someone an independent contractor doesn't make it so,” Secretary Dejoie said.
Using a variety of sources, the LWC has received numerous referrals of labor broker activity in the past year. Sixteen audits have been completed, uncovering more than 1,000 misclassified workers.
The GAME ON audits are just part of the LWC's cache of resources in its fight against worker misclassification. Audits conducted by the LWC outside of the GAME ON efforts are initiated by information provided by the IRS, as well as tips and leads from the LWC's fraud reporting website, part of the agency's www.laworks.net website. The LWC's Office of Workers' Compensation (OWC) monitors a toll-free hotline, (800) 201-3362, where suspected fraud activity can be reported anonymously.
Last year, the LWC OWC Fraud Section made numerous referrals to the Louisiana Attorney General's Office. Of these referrals, suspected injured worker fraud totaled more than $36,000. Referrals of suspected employer fraud totaled $130,945. During that same time, 101 employers were contacted to provide proof of workers' compensation coverage, resulting in 31 hearings held in the workers' compensation courts and the assessment of civil fines and orders for employers to provide proof of insurance as required by the statute.
Because of the rise in companies without workers' compensation insurance, the LWC OWC created an automated system to aid in the tracking and recording of all compliance activities. The Mandatory Insurance Compliance System (MICS) was created in-house, utilizing the same software and docketing system operating within the workers' compensation courts.
Additional workers' compensation insurance fraud prosecutions have been initiated from recent GAME ON audits.