The following information was sent out yesterday (August 21, 2014) by members of our Labor & Employment team in Virginia. If you have employees in Virginia, you need to read this and consider how it may affect your company.
Virginia Governor Terry McAuliffe signed Executive Order 24 on August 14, 2014, to establish an interagency task force on worker misclassification and payroll fraud.
The Executive Order is a response to a 2012 finding (by the Joint Legislative Audit and Review Commission (JLARC) of the Virginia General Assembly) that one-third of audited employers in certain industries misclassify employees, resulting in a failure to provide workers’ compensation insurance and unemployment insurance, to pay payroll taxes, and to comply with minimum wage and overtime laws. These employers are able to save up to 40 percent in costs, giving them a competitive advantage over complying employers. JLARC found that worker misclassification also lowers state income tax collections by up to $28 million each year.
The task force will be made up of representatives from 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, and will be chaired by the Secretary of Commerce and Trade. The task force is aimed at better coordinating the efforts of these agencies and developing a comprehensive plan to reduce worker misclassification and payroll fraud in Virginia.
The Executive Order provides seven specific roles for the task force:
- 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;
- Implementing a pilot project for joint enforcement;
- Developing educational materials for and an outreach strategy to employers;
- Advising on any technological improvements in worker misclassification and payroll fraud detection; and
- Recommending any appropriate changes to relevant legislation or administrative rules.
The task force will develop a plan and present a progress report to the governor by December 1, 2014.
Governor McAuliff’s Executive Order follows a 2013 attempt by the legislature to create a task force with similar responsibilities. Although a bill was introduced in the Senate, it never made it out of the House of Delegates.
Virginia is not the only state to operate a task force focused on worker misclassification and fraud. In 2009, Maryland created a Workplace Fraud Task Force, which was given similar responsibilities.
Governor McAuliffe’s action – and action by other states – should prompt employers to conduct self-audits of worker classifications, to ensure that they do not become the subject of government scrutiny.