As previously mentioned here, Maryland’s Workplace Fraud Act imposes new penalties on employers who misclassify employees as independent contractors. At a talk before the Maryland State Bar Association’s Labor and Employment Section’s annual meeting recently, representatives from the state’s Department of Labor, Licensing and Regulation explained the Department’s focus on the landscaping and construction industries. Because studies had indicated that these industries were particularly likely to misclassify employees, the new Maryland law gave additional teeth to the Department in pursuing employers found to engage in a willful pattern of classifying employees as independent contractors. The harm to employees include the lack of worker’s compensation protection, the lack of unemployment benefits, the burden of the self-employment tax on employees, and the inapplicability of anti-discrimination laws. According to the State, more investigators are on the job. Employers should expect more audits of their workforce, as well as site visits.
The federal Department of Labor recently made a similar pronouncement. Yesterday, Secretary of Labor Hilda Solis stated:
“There is no excuse for employers who disregard federal labor standards – especially those that are designed to protect the most vulnerable in the workplace. The failure to comply with these basic labor standards means that workers are not receiving the money they have earned. It is both an economic issue and a fairness issue. America’s workers should rest assured that protecting worker rights is a top priority at the Department of Labor. To make good on that promise, I have hired an additional 250 new wage and hour investigators, a staff increase of more than one third, to ensure that we promptly respond to complaints and can undertake more targeted enforcement.”
Both federal and state laws permit an employee to obtain additional damages from an employer who willfully withholds wages or misclassifies an employee. Employers now need to watch employees and the government watching their practices.