Dept. of Workforce Development: #AccountableGov: Crackdown on worker misclassification nets $1.4 million in unpaid taxes, interest & penalties

CONTACT: DWD Communications, 608-266-2722

MADISON – Today, Department of Workforce Development (DWD) Secretary Ray Allen announced that due to the department’s efforts to combat the misclassification of workers in Wisconsin across numerous industries, the state netted $1.4 million in unpaid Unemployment Insurance (UI) taxes, interest and associated penalties. This figure doesn’t include the additional dollars brought into the UI Trust Fund due to continued compliance with UI tax law.

The state’s efforts to reduce worker misclassification is part of a multi-pronged, anti-fraud initiative that is designed to ensure employers comply with requirements to classify workers correctly as employees or independent contractors under unemployment, worker’s compensation and equal rights law. Employers who misclassify workers as independent contractors unfairly avoid UI tax and other tax obligations. Conversely, combating worker misclassification has protected and strengthened the state’s UI Trust Fund, which ended 2017 with a balance of nearly $1.5 billion and increased $313 million over the year. The latest annual report detailing the state’s strong UI anti-fraud measures is available online.

“The state’s UI program plays an important role in helping workers as they rapidly transition from a period of unemployment to a new, rewarding career,” Secretary Allen said. “We owe it to the Wisconsin employers that fund this vital program to ensure that everyone plays by the rules so that workers who are out of work through no fault of their own have access to the temporary safety net they need, and so that businesses don’t gain an unfair competitive advantage by skirting legal obligations.”

DWD operates a dedicated Worker Misclassification Unit, staffed with a team of seasoned, former law enforcement professionals, many of whom specialized in investigating white-collar crime during their previous careers. This unit teams with the UI Division’s Audit Section as well as the Program Integrity Section to effectively investigate, formulate cases and pursue monies owed to the UI Trust Fund as well as associated penalties.

Since 2013, the Worker Misclassification Unit has invested $1.2 million in federal grant funds to:
– Conduct over 1,550 on-site investigations, in addition to thousands of audits conducted by the audit section
– Publish two educational videos in November 2016, one to assist employers in properly classifying workers, and the other to help employers prepare for a UI tax hearing. To date the videos have been viewed approximately 700 times.
– Execute a statewide public awareness radio campaign in fall 2017 to highlight the importance of proper worker classification and encourage individuals to report suspected misclassification. The radio announcements were broadcast 11,000 times on 190 Wisconsin radio stations in the fall of 2017 and will be repeated during the beginning of this year’s construction season.

If you suspect misclassified workers are being utilized at a business or job site, please send an e-mail to workermisclass@dwd.wisconsin.gov to provide the department with that information.

“Although strong penalties exist for employers that intentionally misclassify workers as part of their business practices, we aim to use those measures only for the most egregious cases, choosing first to educate employers and encourage them to voluntary comply with UI tax law,” Secretary Allen said. “We thank the Governor, members of the Wisconsin State Legislature as well as the Unemployment Insurance Advisory Council for providing us with the tools to help level the playing field for Wisconsin employers who follow the law.”

More information on DWD’s Worker Misclassification program is available online.

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