National Unemployment Insurance Tax Conference Worker Misclassification Workshop. Connecticut Department Of Labor Carl Guzzardi September 17, 2013

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1 National Unemployment Insurance Tax Conference Worker Misclassification Workshop Connecticut Department Of Labor Carl Guzzardi September 17, 2013

2 CT Targets Worker Misclassification General Assembly passed Public Act that established the Joint Enforcement Commission (JEC) on Employee Misclassification JEC members: Department of Labor, Department of Revenue Services, Workers Compensation Commission, Attorney General s Office, Office of the Chief State s Attorney Coordinate civil prosecution of violations of state and federal laws as a result of employee misclassification; report any suspected violation of state criminal statutes to the Chief State's Attorney Report to the Governor and General Assembly summarizing JEC actions for the preceding calendar year including recommendations for administrative or legislative action

3 Actions of JEC Legislation October 1, 2010; increased WCC non-compliance penalty from $300 per violation to $300 per violation PER DAY Online complaint/referral form created, database developed to capture referrals and complaints and to show results of enforcement activity. DOL and DRS have established a formal referral system to act quickly on joint enforcement cases and referrals Ongoing efforts; Develop protocols for joint investigations Inter-agency training, public awareness and education outreach Analyze penalty structure, recommend new legislation to stop the illegal misclassification of employees; increase penalty next session Continue strategic and coordinated enforcement in industries that have historically demonstrated high incidence of worker misclassification Conduct research to identify other industries with a high incidence of misclassification

4 Actions of JEC Inter-agency training in areas such as, investigation safety, legal issues, investigative techniques, field communication procedures and construction practices USDOL Wage & Hour led sessions New legislation enacted June 18, 2013, the Department of Insurance and the Department of Consumer Protection have been added to the JEC Increase education/outreach to the business community, to raise awareness of the problems of misclassification Continue to identify entities, governmental and private, that can help to monitor and participate in education and enforcement activities Improve processes for sharing information and maximizing resources of state and federal agencies

5 Multi Agency Initiatives USDOL Wage and Hour; MOU signed September 19, 2011 USDOL; UI Data Sharing Initiative IRS; SPR for 1099 data access, SS-8 s; QETP Frequent referrals from and to CT Wage and Workplace Standards Division Frequent referrals from and to CTDRS Frequent referrals from and to other state DOL agencies Automatic routing of completed investigations to JEC participating agencies

6 What the employment landscape looks like Rising levels of employer non-compliance Increasing numbers of independent contractors Increasing frustration in the law abiding employer community Rising costs of proper worker classification What can change the climate: Industry demand and support for reform Proactive agency involvement Decisive legislative response and action Business support

7 Stop Work Order Public Act effective October 1, 2007: Any employer who (1)(A) knowingly misrepresents one or more employees as independent contractors, or (2)(B) knowingly provides false, incomplete or misleading information to such company concerning the number of employees, for the purpose of paying a lower premium on a policy obtained from such company, shall be guilty of a class D felony and shall be subject to a stop work order issued by the Labor Commissioner in accordance with section 31-76a, as amended.

8 Compliance Violations Failure to secure coverage Misclassifying an Employee as an independent contractor Understating or concealing payroll for the purpose of a lower premium Out of trade work being performed Failure to supply records as requested

9 Establishing the Violation Request proof of Workers comp coverage include application page Verify proof via NCCI and Insurance carrier Establish cash payment or employees being paid off the books Establish misclassification of independent contractors

10 Conducting a Field Interview (Construction Industries) Identify the employer Peel the Onion: Identify the general and determine who is the sub-contractor for the work the employees are doing. Identify the layers of sub-contractors. Follow the money in all directions. Who does the general pay, who does the sub pay, who are the unidentified subs. Collect information on all subs.

11 Conducting the Field Interview Identify employees or workers Names (request ID) Social Security Numbers Address Telephone number Length of employment Rate and method of pay Person delivering pay Type of work being performed Name of supervisor/crew leader

12 Taking Enforcement Action Investigator has established that the employer has understated payroll or misrepresented employee duties Contact Supervisor, outline violation, and request authorization for a Stop-Work Order. Post the Stop Work Order(SWO) at the site or place of business. If the employer is present, serve the SWO and the records request. If the employer is not present contact him by telephone to notify that the business is receiving a SWO.

13 Taking Enforcement Action Notify the general(primary) contractor that the sub is under a SWO. Explain to employer that as of the posting of the SWO there is a $ penalty per day to work in violation of the SWO. Obtain any additional documentation from primary ie; contract for work, nature of work performed, job logs, amount of payment, time on the project, etc.

14 Enforcement Provisions Penalty of $ per day for operating in violation of a SWO. Stop Work Orders shall be effective against a corporation, partnership, sole proprietorship and against any successor entity that has one or more of the same principals or officers as the corporation, partnership or sole proprietorship against which the SWO was issued and are engaged in the same equivalent trade or activity. $ Civil Penalty for each violation of subsection(g) of Section

15 Conditions of Release Comply with the Law Pay the penalty or enter into payment agreement Obtain Workers Comp Insurance Put all workers on payroll

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