Colorado Governor’s Task Force on Employee Misclassification delivered its report and recommendations to the Governor on December 7, 2018. The recommendations include increased cooperation among government agencies, tougher penalties, increased outreach, and more education. The press release states:
Governor’s Task Force on Employee Misclassification Issues Recommendations
DENVER — Friday, Dec. 7, 2018 — The Joint Enforcement Task Force on Payroll Fraud and Employee Misclassification has delivered its consensus report to the Governor. The agreement comes after five months of collective discussions on ways to combat employee misclassification and under the table payment within Colorado’s construction industry.
The Task Force identified strategies that will be followed by all parties moving forward including enhanced communications, tougher penalties and greater coordination among state agencies.
“These agreements put weight behind making sure our workers get the pay and protections they deserve,” said Governor John Hickenlooper. “Good things happen when people follow the laws already on our books.”
In June, Gov. Hickenlooper issued Executive Order B 2018 003, forming the Joint Enforcement Task Force on Payroll Fraud and Employee Misclassification in the Construction Industry. The order charged the Task Force with examining the scope of misclassification of employees as independent contractors in the industry and to find ways to reduce and eventually eliminate non-compliance.
The Task Force focused on workers who perform carpentry and interior systems work (such as assembling ceilings, flooring, aluminum stud framing, and drywall) because they believed misclassification was greatest within this sector of the construction industry. In their report they note that “addressing this need will cause positive change in the construction industry more broadly.”
The report cites, “the use of labor brokers, and consequently misclassification, is a prevalent problem with carpentry and interior systems work taking place at large-scale commercial and mixed-use projects in Colorado.”
“We are grateful to Gov. Hickenlooper for his commitment to creating better employment opportunities within Colorado’s booming construction industry,” said Michael Gifford, President, Associated General Contractors. “The unified Task Force commitment among labor, industry and state agencies to address worker classification will hopefully lead to more great careers and profitable businesses as we continue to build Colorado.
The Task Force was comprised of a diverse group of stakeholders including representatives from the Associated General Contractors of Colorado and the South West Regional Brotherhood of Carpenters. The Task Force was led by the Colorado Department of Labor and Employment and the Departments of Revenue, Personnel and Administration, and Regulatory Agencies. TheCity of Denver also participated.
“A safe workplace, accurate pay and appropriate worker protections are fundamental expectations for workers,” said Jim Gleason, Wesern District Representative of the South West Regional Brotherhood of Carpenters. “The Task Force has made some good progress to strengthen safeguards for these basic expectations, and we are optimistic that we will continue that forward momentum in 2019 as well.”
The full report outlines the group’s conclusions and recommendations. Its solutions stress enhanced communication and a reinforcement of what the law requires to the regulated community. The report also calls for more effective coordination between the agencies who play a role in addressing misclassification and a better use of existing statutory authority to address non-compliance. Some of the recommendations will require collaboration across state agencies and with private sector entities. In some cases, efforts are already underway. The Task Force has identified and, in some cases, even already implemented improved tools for compliance.
Key recommendations from the report:
Improved information sharing: The Colorado Department of Labor and Employment has formed a workgroup in conjunction with the taskforce, consisting of representatives from the Divisions of Unemployment Insurance, Workers’ Compensation, and Labor Standards and Statistics. Early on, this workgroup identified ways to share misclassification tips and leads within the agency to promote the mission of the taskforce.
Creation of a new program within the Division of Labor Standards and Statistics: The division has promulgated rules to create a Wage and Hour Direct Investigations Program that will conduct statewide investigations of Colorado wage and hour laws, including failure to pay wages and failure to provide itemized pay statements to employees. The division will hold a public hearing on the proposed rules on December 17 and the rules will be finalized and become effective in February 2019, with direct investigations beginning shortly thereafter.
The Task Force will monitor the success of these efforts in the new year and, to the extent permitted by law, will report on the number of employers cited for violations related to misclassification, the approximate number of employees affected, the amount of wages, premiums, taxes, and other payments or penalties that have been collected as a result of these activities,
Toughening first offense penalties: In the past, if an audit by the Division of Labor Standards and Statistics revealed that a company had misclassified employees, the first violation was considered an opportunity to educate the employer. Only after a second violation was an employer deemed to have willfully disregarded the law. This approach assumed that employers were motivated by voluntary compliance and failed to use fines to enforce equity.
The Colorado Employment Security Act gives the Division of Labor Standards and Statistics the authority to levy fines and prohibit companies from receiving funds from state contracts after a first offense. The division has revised its processes and will now determine on a case-by-case basis whether a company’s actions constituted willful disregard when it misclassified employees.
Increased outreach to the drywall industry, contractors, unions and workers: The Task Force recommends ongoing meetings with general contractors to support a change in the practices of labor brokers and subcontractors. At the request of the taskforce, the Executive Director of the Department of Labor and Employment has met with the president and board chairman of the Associated General Contractors to discuss a mutually acceptable process for educating and encouraging compliance by all parties in large commercial/mixed-use construction projects.
The Division of Unemployment Insurance will also conduct a communications effort to targeted employer groups, providing information regarding worker classification laws and misclassification penalties in the state of Colorado. And the division will continue to provide educational seminars and to work closely with employers during audits.
The Department of Labor and Employment’s Office of Government, Policy and Public Relations has worked in partnership with the Associated General Contractors of Colorado (AGC) and the South West Regional Brotherhood of Carpenters to design a multi-faceted communication and education outreach campaign, targeted to workers, job-site managers and employers. The taskforce has approved this outreach and both AGC and the Carpenters Union are working to assist the Department of Labor and Employment. The implementation of this outreach plan is anticipated early next year.
Strengthening education efforts: In an effort to obtain information from employers regarding their classification of workers and to continue to educate the business community regarding worker classification laws, the Department of Labor and Employment’s Division of Unemployment Insurance has created a Pre-Audit Questionnaire and a Worker Classification Acknowledgement Form for employers. The questionnaire will be used to determine a company’s current understanding of worker classification laws in Colorado and what information the company relied upon when determining whether to classify workers as independent contractors or covered employees.
The full report outlines the Task Force’s recommendations, identifying enforcement, education and compliance assistance as tools in addressing misclassification. Click here to read the full report.
While the goal has been to drive change as rapidly as possible, the taskforce recognizes that there is still work ahead. In the new year, the Task Force will review national best practices and consider additional solutions, including the possibility of either legislation.