[Updated 4-24-12.]
Connecticut is considering charging with a felony crime employers and staff who improperly list full-time employees as independent contractors, as the state continues a crackdown on the practice.
Employee misclassification is currently a misdemeanor under state law.
With the construction industry long among those coming under the state microscope for misclassifying workers, one Fairfield County home health care agency addressed fears the Connecticut Department of Labor would broaden its reach to address its “registry” business model under which patients pay caregivers directly, with a fee for the agency.
Griswold Special Care currently pays all applicable state and local taxes, including unemployment and workers compensation insurance. On fears Senate Bill 330 would impact its tax structure, founder Cathy Howard conferred with state officials and learned that was not the intent of that bill, which has been since tabled.
“If we were forced to go ”˜full payroll”™ we would have to raise our rates,” testified Howard, whose Griswold Special Care has locations in Stratford and Bethel. “We agree with DOL in the added protections for the caregiver with respect to unemployment and ”¦ workers’ comp (insurance) ”¦ It”™s the withholding piece that blows up the whole registry model.”
Kia Murrell, a lobbyist with the Connecticut Business and Industry Association who tracks employer legislation, testified any elevation of worker misclassification to a felony crime seems unwarranted given the lack of any data suggesting a major increase in worker misclassification.
“Any penalties imposed on bad actors should be reasonably tailored to deter future violators without harshly punishing the bad actors who might otherwise be law-abiding employers,” Murrell said.
Last September, Connecticut became one of seven states to work out a system to share data with the U.S. Department of Labor and the IRS with an eye on ferreting out employers that are misclassifying workers as independent contractors.
Between March 2010 and February 2011, the Connecticut Department of Labor”™s tax audit unit completed 1,600 audits and investigated another 9,000 individual wage complaints, while cobbling together statistics on what industries have a high incidence of misclassified workers.
The Connecticut DOL audits resulted in the reclassification of a whopping 6,500 workers and the discovery of roughly $50 million in previously unreported or underreported payroll.
At last report at the Connecticut Department of Revenue Services, DRS had 22 worker misclassification cases underway, without identifying the companies targeted. For its part, DOL has regularly gone public with stop-work orders it issues, with March enforcements covering a half-dozen construction sites in Fairfield County.
Workers have also taken their beef to federal court ”“ under former CEO Vincent Wasik, Velocity Express was the subject of lawsuits several years ago by drivers who said the company paid them as independent contractors, even though their Velocity Express scheduling prevented them from contracting their vans out to other companies. The U.S Department of Labor also investigated the company”™s wage practices.
In 2009, a federal bankruptcy judge in Delaware approved the sale of Velocity Express to Florida-based ComVest. Velocity Express subsequently moved its headquarters from Westport to Texas.
Editor’s note: this is a clarified version of an earlier article that ran in print and online, specifying that Griswold Special Care pays all applicable taxes; and updated to reflect Senate Bill 330”™s status.
