LA Employers Face Fines Following Misclassification Crackdown

Liz Carey

New Orleans, LA (WorkersCompensation.com) – Employers recently busted in a statewide misclassification audit will face fines and federal penalties, authorities with the Louisiana Workforce Commission (LWC) said.

Recently, the Commission announced, as covered in WorkersCompensation.com, that it had audited nearly 1,000 companies since July 2017 and uncovered more than 3,300 cases of misclassified workers.

Those businesses, a spokesman from the Louisiana Workforce Commission said in an email interview with WorkersCompensation.com, will face fines, back pay, penalties and interest once the audit reports and site inspections are complete.

“The fines for misclassification are as follows: Unemployment Insurance (See. La. R.S. 23:1711(G) and 1660: In addition to back taxes, penalty, and interest, 2nd offense $250 per misclassified worker, 3rd offense $500 per misclassified worker; 2 or more offenses — up to $1,000 fine and/or up to 90 days in prison with each misclassified employee considered a separate offense. (Unemployment Insurance) may also assess an additional $5,000 penalty when an employer refuses to allow an audit of its records,” said Michael Key, spokesman for LWC.

“At this time, audit reports on the site inspections are incomplete. Therefore, it has not been determined what kinds of fines, if any, these employers will face. Also … overtime and pay issues are within the purview of USDOL’s Wage and Hour Board, an agency with whom we have a cooperative endeavor agreement.”

The audit was a statewide effort to curb misclassification by Louisiana employers, and part of LWC Secretary Ava Dejoie’s task force GAME ON, to address the issues. GAME ON stands for Government Against Misclassified Employees Operational Network — and was organized last year by Dejoie to bring together various state agencies, including the workers’ compensation bureau, unemployment insurance tax auditors and others to address the problem.

Misclassifying workers as independent contractors allows employers to avoid deducting taxes, paying overtime wages or providing other benefits like workers’ compensation insurance.

“The 3,300 misclassified workers resulted in more than $11 million in unreported taxable wages and hundreds of thousands of dollars in unpaid unemployment taxes,” LWC Secretary Dejoie said. “This practice creates a financial disadvantage to those companies that are complying with employment and payroll laws.”

While many of the misclassifications incidents happened in the construction industry, the problem is not limited to just that employment segment, Key said.

“Misclassification is prevalent among a cross spectrum of industries,” he said. “However, it has been most noticeable, recently, in the construction, hospitality and home health care industries.”

Dejoie announced that unscheduled audits would continue as long as tips about misclassification continued to come in to the LWC offices.

LWC said it will continue to conduct unannounced site inspections, particularly in the New Orleans area.

“Unannounced site inspections will continue until the unfair business practice of misclassifying workers stops,” Dejoie said in a statement. “Our message is clear — misclassifying workers will not be tolerated in our state.”