Virginia’s Inter-Agency Task Force on Worker Misclassification and Payroll Fraud issued its report outlining 11 recommendations to combat independent contractor misclassification, Gov. Ralph Northam announced.
The report is the result of an August executive order by Northam that directed the task force to produce updated recommendations to measure and combat misclassification ahead of the 2020 General Assembly session.
According to the report, an estimated 214,000 Virginia employees are misclassified as independent contractors by their employers. Its recommendations include imposing harsher penalties for businesses that illegally misclassify their workers, increasing education for employers and employees, and providing additional funding for investigations into possible wrongdoing.
The complete recommendations:
- Virginia is a tax conformity state, and has long conformed to the IRS standards both for the “test” of employment and for its approach for penalties that are assessed. The task force believes that penalties should be substantial enough to deter misclassification, which is not presently the case in Virginia.
- That penalties apply even when an employer received advice, consultation or counsel to engage in worker misclassification as a business model.
- That legislation provides for a private cause of action against an employer for recovery of damages for misclassification to include wages, taxes, and value of benefits lost, and attorney’s fees.
- That legislation provides whistleblower protection for those who report suspected misclassification or other workplace fraud.
- That the Board for Contractors at the Department of Professional Occupational Regulation be directed to promulgate a regulatory violation of “intentional improper classification of workers” as an element of unprofessional conduct for a licensed contractor firm, subject to sanction by the board.
- That bidders be debarred for graduated periods of time, based upon repetition or severity of violations, from bidding on and receiving awards of contracts under the Virginia Public Procurement Act when the bidder is found to have violated requirement of proper worker classification. It is recommended that this be added to the Virginia Public Procurement Act.
- That legislation or executive directive cause the Virginia Employment Commission, the Department of Taxation and other commonwealth agencies to undertake specific workplace fraud and misclassification investigations in a joint fashion to gather evidence for enforcement actions that the task force continue its work under Executive Order 38 to determine the procedures, processes, organizational structures, and interagency authorities that must be developed to streamline the continuing exchange and sharing of information to achieve joint enforcement. These efforts will include a thorough review of internal policies, procedures, and processes which will help streamline misclassification, payroll fraud and wage theft claims.
- That an agency be identified, and given authority to lead these efforts in the new organizational structure.
- That additional funding be provided for educational outreach to educate and inform the general public, workers and employers explaining the definition and responsibilities of being classified as an independent contractor and the benefits and protections of being classified as an employee.
- That funding be provided to support the interagency model that is developed to continue joint cooperation, information sharing, investigation and enforcement, including the hiring of investigators.
- Finally, there is a consensus that it would be advantageous to the commonwealth for the task force to remain in place for the duration of the executive order and reconvene as needed.
The complete report can be found here.