LWC is Cracking Down on Employers who Use Independent Contractors
The Louisiana Workforce Commission is on a mission to identify every worker who was misclassified in Louisiana. It is a huge revenue stream for a state that is struggling, and it could be devastating to small businesses who utilize independent contractors.
In 2015, LWC audited over 860 companies and determined that over 12,000 workers were misclassified as independent contractors when they were really employees. Misclassifying employees as independent contractors allows companies to avoid paying overtime, unemployment taxes, workers’ compensation premiums and their portion of Social Security and Medicare taxes.
LWC Executive Director Curt Eysink said stepped-up efforts by LWC auditors have identified about $83 million in under-reported wages to date in 2015, resulting in the collection of more than $923,000 in unemployment insurance taxes owed by employers. “We’ve ramped up our efforts in recent years thanks to new laws such as Louisiana’s Fair Play Act of 2012 and cooperation with state and federal agencies that are sharing data on companies. We want to provide a level playing field for companies that are following the law and are providing the benefits they are required to offer their employees,” he said.
LWC can audit any employer, but it generally chooses employers based on the employer’s risk level, using tips, complaints, information from partner agencies and also focus on industries, such as construction, hospitality and personal services, in which worker misclassification has been prevalent.
An audit is not the only method LWC uses to determine whether a worker has been misclassified. A worker’s status as an employee or an independent contractor is determined as part of the process when a claim for unemployment insurance benefits is filed.
After the employer is notified of the LWC’s determination, the employer must correct classifications and pay unemployment taxes that are due, including possible interests and penalties on back-taxes due. An employer found to be misclassifying workers may appeal the finding to an administrative law judge.
