Tag Archives: misclassification

Cutting Corners Costs Lives: Non-Union Work Sites Twice As Dangerous As Union Sites

This large inflatable rat is a common sight at protests of non-union worksites in New York City.

Today’s post comes from guest author Catherine Stanton, from Pasternack Tilker Ziegler Walsh Stanton & Romano.

As an attorney who practices in the metropolitan area, I often find myself traveling into New York City. I am amazed at the amount of construction that I see; the cityscape is changing and evolving rapidly. This construction boom means more business, a steady paycheck for workers, and more money for the city and state. Unfortunately, with the rise in construction also comes a rise in safety violations, injuries, and fatalities.

The New York Committee for Occupational Safety and Health (NYCOSH) recently issued a report called Deadly Skyline regarding construction fatalities in New York State. A summary of their findings notes that from 2006 through the end of 2015, 464 construction workers died while on the job, with falls as the leading cause of death. When a fatality occurred, safety violations were inherent in more than 90 percent of the sites inspected by the Occupational Safety and Health Administration (OSHA). The report pointed out that non-union work sites had twice the safety violations of union sites, and in 2015, 74 percent of the fatalities occurred on non-union projects with the majority of the fatalities involving Latinos.       

It is painfully obvious that shortcuts and cost-saving measures result in injury and death. Many employers use misclassification as a means to save money. Misclassification occurs when an employee is labeled as an “independent contractor” so that a business owner doesn’t need to pay Workers’ Compensation insurance, Social Security, Medicare, or unemployment taxes. Some even resort to paying employees off the books as well in an effort to save money. This may not seem troublesome until you realize that this is a one-sided deal that really only benefits the employer. According to the NYCOSH report, misclassification of workers allows an employer to skirt the safe workplace requirement as OSHA does not cover independent contractors.

Employers must provide Workers’ Compensation insurance for their employees, and typically must notify their Workers’ Comp carrier as to the number of employees they have and the type of work they do. A risk analysis is performed and then employers are assigned a premium to pay in order to cover their workers in case of injuries. If injuries occur, premiums may be increased accordingly. Obviously employers in high-risk businesses must pay more for their premiums than those with employees involved in low-risk jobs. As injuries on misclassified workers do not add to an employer’s bottom line, there is less incentive to provide safety measures if it cuts into profits.

To make construction sites safe, NYCOSH recommends adequate education and training as well as legislation to punish those whose willful negligence causes a death. They also recommend passage of the NYS Elevator Safety bill that requires the licensing of persons engaged in the design, construction, operation, inspection, maintenance, alteration, and repair of elevators. It would also preserve Section 240 of the New York Labor Law, commonly referred to as the “scaffold law,” which governs the use of scaffolding and other devices for the use of employees. Weakening the Scaffold Law would shift safety responsibility from owners and general contractors who control the site, to workers who do not control the site and are in a subordinate position.

It is a true tragedy when someone is maimed or killed in an accident that could have been prevented. Not every employer engages in these tactics, and most workplaces are generally safe spaces for workers. However, even one death is too many. 

 

 

Catherine M. Stanton is a senior partner in the law firm of Pasternack Tilker Ziegler Walsh Stanton & Romano, LLP. She focuses on the area of Workers’ Compensation, having helped thousands of injured workers navigate a highly complex system and obtain all the benefits to which they were entitled. Ms. Stanton has been honored as a New York Super Lawyer, is the past president of the New York Workers’ Compensation Bar Association, the immediate past president of the Workers’ Injury Law and Advocacy Group, and is an officer in several organizations dedicated to injured workers and their families. She can be reached at 800.692.3717.

Are You Misclassifying Your Workers and Committing A Fraud?

Today’s post comes from guest author Leonard Jernigan, from The Jernigan Law Firm.

To avoid misclassifying your workers follow these tips:

  • Don’t make assumptions. If you are a business owner you should consult a tax professional and an attorney to ensure you are complying with IRS and labor laws when hiring staff or contractors.
  • If contracting with staffing companies or labor brokers, make sure those agencies are properly classifying its workers as employees. Companies can be held responsible for labor violations of their contractors.
  • Consider filing a SS-8 Form (Determination of Worker Status) with the IRS and ask that agency to determine whether the worker is an employee or independent contractor.
  • Be aware that contractors set their own schedules and pricing, and perform the work as they see fit. If you want control over these areas, make sure you hire an employee.
  • Check the workers’ compensation policies of any subcontractor you hire. (Look out for “ghost policies,” which aren’t designed to cover known employees.)
  • Don’t rely on excuses such as “He only works a few days a week.” “She agreed to be an independent contractor.” “They use their own tools.” “He’s done this for so long he doesn’t need my supervision.”

Thanks to McClatchy DC!

 

Legislative Changes To Workers’ Compensation – Wisconsin and National

As we in Wisconsin wrestle with Governor Walker’s ill-advised proposal to split up an efficient and time-honored workers’ compensation system (for alleged purposes of “efficiency”), it is instructive to reflect on the legislative proposals during the first quarter of 2015 across the nation in workers’ compensation. 

A National Council on Compensation Insurance, Inc. (NCCI) annual issue symposium in Florida reported that over 600 workers’ compensation bills were filed in the first quarter of 2015. Over 10% of these (65) deal with presumptive coverage for First Responders, giving First Responders the presumption of workers’ compensation coverage for their injuries and occupational exposures. (This is a topic that has come up a lot since the September 11 attacks, bolstered by other tragic news such as the 2012 Sandy Hook Elementary School shooting).

The next most popular type of bills filed during the first quarter of 2015 included bills revising the definition of an employee (37 bills), occupational diseases (36 bills), reimbursement and fee schedules (33 bills) and indemnity benefits (32 bills).

The definition of employee versus Independent Contractor or subcontractor has been a popular issue regarding lawsuits such as Uber Technologies and Lyft, Inc. and the self-storage and moving marketplace eMove, Inc. Interestingly, on the issue of benefits (and attorney fees that apply to those benefits) “If you increase attorney fees you are likely to increase attorney involvement,” aid Lori Lovgren NCCI Division Executive of State Relations . However, she also noted: but “injured workers are going to need assistance. If the compensation to attorneys is not enough for attorneys to assist, then there is going to be an access problem.” Her reference was to the Florida Supreme Court case Ciastellanos v. Next Door Company, which explores whether attorney fee caps were constitutional.

 

Misclassification – Department of Labor Recovery

Today’s post comes from guest author Leonard Jernigan, from The Jernigan Law Firm.

The U.S. Department of Labor has recovered more than $1 million in back wages and liquidated damages for 196 employees of Bowlin Group LLC and Bowlin Services LLC out of Ohio and Kentucky. Bowlin Services installed cable for Insight Communications, a cable, telephone and Internet provider in Kentucky. The defendants misclassified 77 employees as independent contractors and violated the Fair Labor Standards Act (FLSA) by denying these workers access to critical benefits, including minimum wage, overtime, family and medical leave, unemployment insurance, workers’ compensation and failing to maintain accurate payroll records.

Misclassifying employees negatively impacts our economy, generating losses to the U.S. Treasury, Social Security and Medicare funds, state unemployment insurance, and state workers’ compensation funds. It also leads to unfair competition because businesses that play by the rules are at a disadvantage.

This problem has become so acute in Tennessee that last month the legislature passed Senate Bill 833, which has been signed into law and imposes penalties on construction companies for misclassifying workers in an attempt to evade workers’ compensation premiums. A Tennessee study in 2012 revealed losses of up to $91.6 million in workers’ compensation premiums. North Carolina has identified the problem but has yet to take any action. Until states aggressively prosecute misclassification, this fraud will continue.

Misclassification Fraud Across the Country

North Carolina Governor Bev Perdue Signed Executive Order 125

Today’s post comes from guest author Leonard Jernigan from The Jernigan Law Firm.

“Misclassification” is a poorly chosen word to describe fraudulent conduct by employers who misclassify the status of their employees. For example, a roofing company may have 30 roofers doing the actual work but these workers are classified as “independent contractors” instead of employees. Why would they do that? At the end of the year these workers are sent a 1099 tax form that reports the wages paid, but the employer does not make any deductions for Medicare or unemployment, and doesn’t pay for workers’ compensation insurance. If you have a roofing company and you properly classify your employees, you are at a competitive disadvantage in bidding on jobs. Honest businesses are hurt by misclassification, and taxpayers are hurt because they pick up medical bills and other expenses created when one of these “independent contractors” gets hurt.

Another form of misclassification is when a construction company with 85 employees reports to its workers’ compensation insurance company that 75 of these people are staff workers, which results in a significantly reduced premium. Obviously, a construction worker is at greater risk of injury than an office worker. Again, the honest company who accurately reports the status of its employees is at a competitive disadvantage with the dishonest employer.

New York, New Jersey, Massachusetts, Virginia, Michigan, Florida, California, Texas and the vast majority of states across the country have been looking into this issue for several years and they have been aggressively prosecuting dishonest employers who try to game the system. North Carolina has finally joined these states. On August 22, 2012, Governor Beverly Perdue issued Executive Order 125, which created a task force to study this issue and try to get different agencies to communicate with each other and share information to identify employers who are failing to pay employee taxes. Hopefully, this task force will figure out how to enforce existing law. This blog will follow the progress of this task force. Stay tuned.

Wacky Worker’s Comp Week. Stripper Denied Worker’s Comp Benefits

The South Carolina Supreme Court found that an exotic dancer was an “Independent Contractor,” not an employee.

What a wacky week in the world of worker’s compensation.

We found that a stripper who was seriously injured by a bullet fired at the club where she was working was not entitled to worker’s compensation benefits because the South Carolina Supreme Court found she was not an employee, but rather a “Independent Contractor.” She had serious intestinal, liver, pancreas, kidney, and uterus injuries, and had her kidney removed – which rendered her unemployable as an exotic dancer. She claimed she was an employee because the club controlled her activities, including telling her when to dance, what music to dance to, and required her to strive to get VIP dances.

In Wisconsin, an employer’s inclination to mis-categorize an employee as an “Independent Contractor” can be tempting: avoidance of payment of worker’s or unemployment compensation premiums, payroll and Social Security taxes, and other employee benefits.

The Court of Appeals disagreed, indicating she decided the manner in which she performed her dances to satisfy the Boom Boom Room Club customers. In Wisconsin, an employer’s inclination to mis-categorize an employee as an “Independent Contractor” can be tempting: avoidance of payment of worker’s or unemployment compensation premiums, payroll and Social Security taxes, and other employee benefits. For many years the Courts and the Commission wrestled with the legal distinction between Independent Contractors and employees. Workers who maintained a separate business and held themselves out to render service to the public were Independent Contractors, if not employers themselves; all other workers were employees.

The legislature clarified the test for determining Independent Contractors status, indicating an Independent Contractor must maintain a separate business with his or her own office equipment, materials and other facilities, and hold or apply for a Federal Employer Identification Number. Seven other specific criteria apply. Any single criterion that rules out many Independent Contractors like the absence of a Federal I.D. Number or filing self-employment tax returns makes alleged “Independent Contractors” employees and covered under worker’s compensation in Wisconsin. Many employers including trucking companies, temporary help agencies, and up to and including exotic dancers are asked to sign Independent Contractor contracts when in fact they really are employees under worker’s compensation.