State task force tackling payroll fraud disbands without adopting proposals

Louisiana’s Misclassification of Employees Task Force, which was assembled to tackle employer payroll fraud in the state, held its last meeting on Wednesday and disbanded without adopting most of the proposed legislation its members had hoped to give to state lawmakers for the regular session beginning April 12. 

After drafting a full report containing seven different proposals, the members tabled the five most substantive proposals and decided they would ask lawmakers to reassemble the task force for another session, Louisiana Illuminator reports

A Senate resolution in October instructed the Department of Revenue to assemble a task force of experts to investigate the problem of businesses, often in the construction industry, misclassifying their workers as independent contractors instead of employees, which lets employers avoid paying several payroll taxes to the state—namely unemployment, workers compensation and income taxes.

Louisiana has more than 13,000 misclassified workers, costing the state more than $12 million in unpaid taxes, according to a 2019 study by the Louisiana legislative auditor. The primary problem, according to the auditor, is the state’s practice of issuing warnings, rather than fines, to companies that misclassify workers. Louisiana also doesn’t hold contractors responsible for hiring misclassified workers from third-party labor brokers, making enforcement more difficult for the Louisiana Workforce Commission. Even worse, the rarely issued fines are only $250—in accordance with a state statute that has essentially made it more cost-effective to break the law.

Despite last week’s announced plan to ask for more time, task force chairman Luke Morris, who is assistant secretary of the Louisiana Department of Revenue, managed (along with his staff) to produce a full report with seven recommendations in time for Wednesday’s meeting. One of those proposals would have eliminated the warnings for first violations and implemented a $500 fine that would be subject to a mandatory waiver if the employer becomes compliant within 60 days. 

That recommendation is far from what experts had suggested to the task force and what is in line with other states. 

In a review of the laws of 49 other states, LWC Secretary Ava Dejoie found the average fine for first-time violators is $5,000 and as high as $15,000 in some places. Read the full story.