The Louisiana Workforce Commission (LWC) and the Department of Revenue (DOR) recently announced that they are ramping up their efforts to fight worker misclassification in 2018.

A worker misclassification task force known as GAME ON (Government Against Misclassified Employees Operational Network) is based in Louisiana, and is comprised of the Louisiana Workforce Commission's unemployment and workers' compensation divisions and the Louisiana Department of Revenue, in cooperation with the IRS and US Department of Labor. While the task force effort only recently became known as GAME ON, the agencies have been working together to battle worker misclassification since 2013, shortly after the Louisiana Legislature passed the Fair Play Act of 2012.

"We are putting companies on notice that misclassifying workers won't be tolerated in Louisiana," said LWC Executive Director Ava Dejoie. "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."

The LWC is in the process of 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.

"We are putting companies who engage in this fraudulent behavior on notice that they shouldn't expect to get away with it," DOR Secretary Robinson said.

Lawsuits against three companies which failed to withhold and submit income tax were filed in December 2017. Several other audits are in progress, with some employers having agreed to pay the assessed withholding tax liabilities.

Law can impose significant penalties in addition to back taxes

For the last several years, the LWC has led the nation in audit-based discoveries of misclassified workers. In 2015, the LWC discovered nearly 20,000 cases of misclassified workers, representing $101 million in unreported wages. The agency can audit employer records going as far back as four years.

In addition to liability for tax 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 of up to 90 days for each offense, and offending employers are barred from receiving state or government contracts for three years. (La.R.S. 23:1711(G); SB 472, Act 786 of 2012.)

Under the law, workers are employees unless they are:

— Free from direction and control in performing their job

— Performing work that is not part of the usual work done by the hiring business OR is not performed on the business's premises

— Customarily engaged in an independently established trade, occupation, profession or business.

An employer cannot consider a worker to be an independent contractor unless all three of these facts apply to the individual's work.

The GAME ON task force has focused its efforts on the industries historically known to use independent contractors to a large degree, construction, health care, hospitality, personal services and staffing companies. According to the LWC, a new staffing practice in Louisiana known as "Labor brokers," often seen in the construction and health care industries, is another way employers skirt the law.

Louisiana and the US Department of Labor's MOU on worker misclassification

In 2012, the US Department of Labor (US DOL) entered into a memorandum of understanding (MOU) with Louisiana to share information and coordinate enforcement efforts as they pertain to an employer's incorrectly treating employees as independent contractors. The MOU was renewed in 2016 and is in effect through June 30, 2019.

Louisiana is one of 37 states that have agreed to share worker misclassification information with the US Department of Labor.

Purpose of the federal-state labor department MOU

The focus of this MOU is to share information that may be useful in collectively identifying workers who have been denied access to such benefits and protections as family and medical leave, overtime, minimum wage, workers compensation insurance and unemployment insurance.

Also of interest are governmental revenues lost due to the failure to withhold and/or pay Social Security, Medicare, unemployment insurance or other similar employment taxes as a result of the worker misclassification.

Information sharing

To the extent practicable and allowed by law and policy, the US Department of Labor and the respective state agency agree to:

— Exchange information on laws and regulations of common concern to the agencies.

— Establish a methodology for exchanging investigative leads, complaints, and referrals of possible violations.

— Exchange information (statistical data) on the incidence of violations in specific industries and geographic areas.

Where appropriate and to the extent allowable under law, the US Department of Labor and the respective state agencies may:

— Conduct joint investigations periodically in the state if opportunity provides.

— Coordinate their respective enforcement activities and assist each other with enforcement.

— Make referrals of potential violations of each other's statutes.

Federal program implemented to recoup delinquent SUI taxes

The LWC also recently announced it has begun to collect delinquent state unemployment insurance (SUI) taxes from employers through a federal program called the Treasury Offset Program (TOP). The U.S. Department of Labor issued guidance to SUI agencies in January 2015 on the ability to use TOP for this purpose.

Letters started going out in October 2017 to an estimated 8,000 employers with delinquent SUI tax debts that are at least one year old and total more than $100. Reimbursing employers (i.e. non-profit and government employers who do not pay unemployment taxes but instead reimburse the SUI trust fund on a dollar-for-dollar basis for all unemployment benefits charged to the employer's account for former employees) are not part of this effort. LWC is also excluding employers who are currently in compliance with an existing installment agreement, have a documented bankruptcy, or have a pending appeal regarding their tax debt.

The LWC has also enhanced its monthly delinquent tax notices mailed to employers to provide full details on all past due taxes, including those older than five years. Previously, the tax notices instructed employers to contact the LWC for the total amount due for years-old delinquent tax amounts. The monthly delinquent tax notices now provide actual dollar amounts by quarter and year of the past due amounts, providing full disclosure to the employer of their tax responsibility. State law prohibits any type of forgiveness or amnesty of unpaid unemployment taxes, no matter how old the taxes date back.

Employers with questions about the federal TOP effort or the detailed delinquent tax notices should contact the LWC's Employer Call Center at +1 225 326 6999 or +1 866 783 5567.

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