Federal and state agencies lose out on millions of dollars in tax revenue annually because of worker misclassification. The Department of Labor (DOL) has recently accelerated its investigation efforts and construction businesses are being targeted for potential violations of labor laws. Specifically, employers need to make certain they are accurately classifying their workers as independent contractors or employees to ensure DOL compliance.
In this three-part article, Jacksonville construction lawyers with Cotney Construction Law will discuss how employers can avoid a visit from the DOL regarding worker classification laws. In this part, we will discuss the common reasons why employers violate these laws. It’s important that you understand these laws to ensure your firm doesn’t commit any illegal actions. Remember, construction businesses that fail to comply with federal wage and hour laws risk everything from significant fines to receiving a stop-work order to irreparably damaging the reputation of their business. To ensure your construction firm is protected during a DOL investigation, consult a Jacksonville construction lawyer.
Why Do Employers Violate Laws Related to Misclassification?
Many employers simply don’t understand the legal requirements related to classifying their workers. However, some employers willfully engage in misclassification practices. There are a myriad of ways that an employer can violate wage and hour laws related to the misclassification of employees. Here are some common violations where an employer misclassified their employee as an independent contractor:
- Skirting Wage and Hour Laws: Workers misclassified as independent contractors may not earn the required hourly minimum wage or overtime pay for their work. Employers that break these laws can reduce payroll expenses short-term, but they risk a serious fine down the road.
- Insurance Violations: By not providing workers’ compensation insurance or allowing workers access to their Family and Medical Leave Act (FMLA) rights, the employer again can save expenses related to injuries. However, they are in serious risk of receiving a stop-work order for their negligence.
- Tax Evasion: The employer skirts paying income taxes on the employee and doesn’t provide additional benefits like health insurance or paid time off. Again, this behavior could result in a DOL investigation.
- Startups: Many misclassifications occur during the startup phase of a business when employers lack the financial resources to compensate their employees properly, so they cut corners by misclassifying them. This doesn’t absolve them of a costly fine from the DOL.
- More Attractive: By saving money on their payroll through worker misclassification, a contractor can lower project costs and pay their workers less. This results in more competitive bidding by the company that is breaching these laws. Of course, a bid protest from a competitor may uncover this illegal behavior and lead to a DOL investigation.
There are many ways that employers can willfully perform any of the above violations. Any of these types of violations can result in a visit from the DOL and a significant fine. It’s critical that construction businesses understand that cutting corners today by violating employment laws could result in a devastating fine tomorrow. To learn more about misclassification law in construction, please read parts two and three.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.