DOLI Misclassification in the Workplace

Misclassification in the Workplace

On June 2nd, 2015, the Commissioner of Labor and Industry announced a new policy to address Worker Misclassification in Virginia Occupational Safety and Health (VOSH) Cases

June 2nd, 2015 – Policy Memorandum

News Release: Preventing Misclassification of Workers in VOSH Cases

Misclassification occurs when an employer improperly classifies a worker as an independent contractor who should in fact be an employee.

This policy is intended to improve protections for workers because misclassification can result in payroll fraud, reduced workers’ compensation and unemployment insurance protections and violations of the tax code and other laws designed to protect workers. Employers who are willing to commit payroll fraud and cut corners when it comes to providing employee protections such as workers’ compensation and unemployment insurance may be willing to cut corners when it comes to providing a safe and healthy workplace.

This policy is intended to level the playing field for employers who currently provide all legal protections for their workers against those who misclassify workers. Employers who properly classify workers incur higher payroll costs because they pay costs avoided by employers who misclassify. Employers who misclassify can undercut the bids of those honest contractors who follow the law. Assuring that all employers are playing by the same rules when it comes to classifying employees will help to assure that the construction bid process is fair for all and improve safety and health and other legal protections for workers.

VOSH Policy

Effective July 1, 2015, where VOSH has reasonable cause to believe that worker misclassification has occurred in a VOSH case, the following actions will normally be taken:

In the event that citations and penalties are proposed for the employer, penalty reductions for size and good faith will NOT be afforded to the employer

In construction multi-employer worksite situations, each contractor (e.g., general contractors, prime subcontractors and lower tier subcontractors) will be asked to provide proof of their Department of Professional and Occupational Regulation (DPOR) contractor’s license AND for proof of the DPOR license for any of its’ subcontractors

When it is determined that a construction employer has contracted with an unlicensed subcontractor, VOSH will make a written referral to DPOR for the contractor and its unlicensed subcontractor (DPOR sanctions for contracting with unlicensed subcontractors may include fines, probationary terms, suspension or license revocation)

In cases where the contract value for the specific subcontractor’s job is less than $1,000.00, VOSH will make a written referral to the Virginia Employment Commission (VEC) and/or the Virginia Workers’ Compensation Commission (VWCC) for potential audits of the employer’s employment practices. There may be instances where referrals will be made for contract values over $1,000.00 as well.

Outreach Materials

VOSH Employee Misclassification Brochure

VOSH Employee Misclassification Poster

Powerpoint presentation “Worker Misclassification in Virginia”

JLARC Report – Review of Employee Misclassification in Virginia

Governor’s Executive Order – “Inter-Agency Task Force on Worker Misclassification and Payroll Fraud”

Other References

U. S. Department of Labor

“Employee Misclassification as Independent Contractors”

Virginia Employment Commission

“Classifying and Compensating Employees”, Powerpoint presentation

Virginia Workers’ Compensation Commission