LWC, USDOL renew agreement to continue efforts to level playing field, protect workers

BATON ROUGE, La. – The Louisiana Workforce Commission (LWC) and the U. S. Department of Labor (USDOL) renewed a memorandum of understanding this week to ensure continued cooperation in addressing the misclassification of workers.

Misclassification occurs when a worker, who by law is an employee, is incorrectly classified as something other than an employee. Many misclassifications involve workers labeled as independent contractors. The practice is most often found in industries that routinely use independent contractors, such as construction, health care, and hospitality. However, Louisiana law provides that the LWC has the sole authority to determine worker classification as an employee or independent contractor.

“Companies that illegally misclassify workers can reduce labor overhead by more than 30%. Imagine how successful your favorite sports team would be if its competitors began every game with a 30-point advantage,” said Troy Mouton with USDOL’s Wage and Hour Division. “These workers deserve to be classified properly to ensure their employers pay them every dollar that they earn.”

The term cost shifting is often used in association with employers that do not play by the rules. The costs of operations are shifted to other employers or to taxpayers.

The MOU signed today allows LWC and USDOL’s Wage and Hour division to continue to collaborate by conducting joint investigations and making referrals to each other for specific violations. Since 2018, 70 cases have been referred by the USDOL Wage and Hour Division to LWC. UI Tax audits resulting from the Wage and Hour Division referrals have led to the discovery of over 469 misclassified workers and over $4.4 million in unreported wages. These necessary protections ensure a safe and stable workplace.

“When employers improperly classify an employee as an independent contractor, they avoid payment of social security, workers’ compensation, unemployment taxes, overtime, health care benefits, and other protections afforded American workers and that are required by law,” said Louisiana Workforce Commission Secretary Ava Cates. “This effort is as essential to workers as it to employers, the vast majority of whom are doing the right thing.”

In 2018, LWC proactively formed the GAME ON ((Government Against Misclassified Employees Operational Network) Task Force and began conducting unified and unannounced site inspections to catch employers in the act of worker misclassification. These surprise inspections have led to productive Unemployment Insurance (UI) Tax audits, resulting in the discovery of numerous misclassified employees. From 2019 to 2021, over $1 billion of gross wages were audited, leading to the discovery of over 5,000 misclassified workers. In 2019, LWC secured a criminal indictment of fraud against a single company that misclassified employees as independent contractors to avoid payment of nearly $800,000 in workers’ compensation insurance premiums.

When employers misclassify workers, they often incur Fair Labor Standards Act violations that can result in back wages and liquidated damages owed to affected workers. These amounts can add up quickly and become liabilities for companies when they least expect them or can afford them. Misclassifying workers also deprives workers of their rights to benefits such as job-protected leave, insurance benefits, and eligibility for retirement or investment plans.

Act 455 passed by the legislature last year doubled the fine for the first offense. It also eliminates the initial written warning for first-time offenders. As a result, employers now face financial penalties of up to $2,500 per offense, with each misclassified employee considered a separate offense. Incidences of multiple offenses can also result in offending employers being barred from receiving state or government contracts.

The GAME ON Task Force continues to receive national publicity and has been touted by the US Department of Labor as a best practice. To report suspected cases of misclassified workers to the LWC, call 1-800-201-3362, or use the LWC’s online “Report Fraud” form on its website, www.laworks.net/fraudmenu.asp.