Members from the Virginia Interfaith Center for Public Policy’s Wage Theft Task Force met last week with Secretary of Commerce and Trade Todd Haymore, Deputy Secretary of Commerce and Trade Hayes Framme, Workforce Development advisor Elizabeth Creamer and Commissioners Ellen Marie Hess of the Virginia Employment Commission and Ray Davenport of the Department of Labor and Industry.
This Jan. 6 meeting was a follow-up to a previous meeting to encourage the work of Governor Terry McAuliffe’s Interagency Task Force on Worker Misclassification, created by the Governor by executive order in 2014. Unfortunately, little was done by the panel in 2015 or 2016.
The misclassification of employees as “independent contractors” undermines business that follow the law, deprives the Commonwealth of millions of dollars in tax revenue and prevents workers from receiving proper wages and legal protections. The issue affects an estimated 250,000 workers in Virginia. By not paying workers’ compensation insurance, unemployment insurance, payroll taxes, or complying with minimum wage and overtime laws, employers lower their cost of doing business by up to 40 percent. The cost to the state in lost revenue was estimated at $28 million in 2011 when a study on the issue was done.
“We do intend to re-convene the Task Force,” said Haymore at the outset of the meeting. “It’s not completely fair to say that it’s not doing any work. Let’s say it has not done as much as it could have done.”
Creamer added that recent meetings with the Governor have happened on this issue.
Sec. Haymore said that he was primarily there to listen, as this was not an issue that he has much background with.
Hess said that from the Employment Commission’s standpoint, workers often don’t even know they’ve been misclassified until they file a claim for unemployment.
“We know that construction, restaurants and other hospitality trades are the prime locations for misclassification,” Hess said. “We do investigate and audit. But the penalty from the VEC is just $75! If that’s all you have to pay, that’s literally less than the cost of doing business. It’s hardly going to stop anybody.”
Haymore asked how much of this practice is malicious and how much is employers simply being misinformed.
“There are a lot of companies out there that are trying to take advantage of workers, and that is malicious intent to me,” said Jason Wheeler, with the Carpenters’ Union. “Almost all construction companies use what are called ‘labor brokers,’ and it’s their very business model. Workers don’t know they have been classified as independent contractors until they get a huge tax bill.”
“We (in the Labor Department) have been told that ‘if you change this you’ll be changing the way the entire construction industry works.’” said Davenport. “Those who play by the rules are being undercut.”
Hess agreed. “Accountants are being told ‘this is the way to avoid the Affordable Care Act.’ Educate the public and you educate the victims.”
“Good enforcement deters bad behavior,” said Kim Bobo, executive Director for the Virginia Interfaith Center. “It is so commonplace… “everyone does it,” but it’s still breaking the law.”
“Workers are afraid that if they complain they will lose their jobs and get black-balled by the industry,” she added. “If we had all the (state) agencies working together and we can publicize it so then employers know it might happen to them, then it becomes a much bigger deal.”
The Virginia Interfaith Center has made wage theft as one of its top priorities for 2017. Worker misclassification is one of the most common forms of wage theft.
For information on the Virginia Interfaith Center for Public Policy, visit www.virginiainterfaithcenter.org.
-Neill Caldwell
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Contacts:
Executive Director Kim Bobo
kim@virginiainterfaithcenter.org / (773) 391-8844
Communications Director Neill Caldwell
neill@virginiainterfaithcenter.org / (804) 332-1386