Worker classification and compliance is in the spotlight once again.
A few years ago in Arizona, a group of workers were re-classified overnight from being employees to ‘members’ of the limited liability organization and who subsequently were no longer under the protection of federal and state wage and safety laws.
A federal investigation into the situation found that 16 defendants in Utah and Arizona had misclassified workers. The companies were forced to pay $700,000 in back wages and penalties for more than 1,000 construction industry workers in the Southwest.
In a report produced by the Institute for Construction Economic Research in January it is estimated that more than 12,000 construction workers in the state, representing about 11.4 percent of industry employees, were misclassified or working off the books in 2018.
In the state of Nevada, a task force has been assembled to address the multi-million dollar issue of employee misclassification and started meeting regularly from early in 2021.
The issue of misclassification impacts businesses and governments domestically and globally. Governments will continue to crack down on lost revenue and recoup thousands of dollars from unpaid payroll taxes.
As states begin to reopen and recuperate their losses, I expect more of these to follow as states are cracking down on the money that they are missing out on due to these misclassification issues. Now more than ever, organizations need to be cautious not to take shortcuts to save time or money, when the risk of severe penalties could follow! Konner Scherry, Global Solutions Manager, CXC Global North America
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Contact CXC directly to discuss how your organization may be at risk of misclassification of workers and to perform an audit of your current workforce. CXC’s proprietary compliance cloud platform, CXC Comply, ensures the correct classification of workers and includes background checks, vetting and right to work checks.
Check out our articles about misclassification here.
With the adoption of remote worker models and hybrid workforces, now more than ever it’s essential to ensure your workers are classified correctly and avoid misclassification penalties and fines.