Virginia Governor Ralph S. Northam announced that he has signed an executive order to establish an interagency taskforce to develop comprehensive recommendations for identifying and preventing worker misclassification and payroll fraud.

The creation of the Inter-Agency Taskforce on Worker Misclassification and Payroll Fraud (Taskforce) is a response to a 2012 report of the Joint Legislative Audit and Review Commission (JLARC) that one-third of employers misclassified their workers as independent contractors placing compliant employers at a competitive disadvantage. JLAC also estimated that worker misclassification lowers Virginia's state income tax collections as much as $28 million a year. (Virginia Governor Ralph S. Northam press release, August 10, 2018.)

The taskforce is required to complete its work plan by November 1, 2018 and report its progress to the Governor by August 1, 2019.

Composition of the Taskforce

The Taskforce will be comprised of agencies with enforcement responsibilities relevant to worker classification, including the Virginia Employment Commission, the Department of Labor and Industry, the Department of Professional and Occupational Regulation, the State Corporation Commission's Bureau of Insurance, the Department of Taxation, and the Workers' Compensation Commission.

Activities of the Taskforce

The activities of the Taskforce include but are not limited to:

— Reviewing statutes and regulations related to worker misclassification and payroll fraud

— Evaluating current enforcement practices of the agencies involved

— Developing procedures for more effective inter-agency cooperation and joint enforcement

— Developing educational materials and an outreach strategy for employers

— Advising on any technological or other improvements in worker misclassification and payroll fraud detection

— Recommending any appropriate changes to relevant legislation or administrative rules

— Identifying ways to involve external stakeholders in the Taskforce's work

— Identifying ways to hold companies working on state contracts who commit payroll fraud through misclassification of workers accountable

— Identifying ways to deter such misconduct through incentives and enforcement mechanisms

Ernst & Young LLP insights

Currently, for Virginia unemployment insurance purposes, workers are employees if their employers:

— Furnish tools, materials and equipment needed to do the work

— Set the hours of work

— Withhold payroll, federal and state income taxes and Social Security taxes

— Receive direction and training from the employer about how to do the work

— Pay by the hour, week, or month instead of being paid at the completion of a job

———————————————
ATTACHMENT

EY Payroll News Flash