Table of Contents - ctdol.state.ct.us · ... Minutes of March, April and May 2010 Meetings Page 5-1...

State of Connecticut Joint Enforcement Commission on

Employee Misclassi�ication

Prepared forThe Honorable Dannel Malloy, Governor

and the Labor and Public Employees Committee of the General Assembly

Annual Report

2011

Commission Members Department of Labor Department of Revenue Services Workers’ Compensation Commission Office of the Attorney General Office of the Chief State’s Attorney

Joint Enforcement Commission on Worker Misclassification December 5, 2011 The Honorable Dannel P. Malloy The Honorable Edith Prague, Co‐Chair The Honorable Bruce Zeke Zalaski, Co‐Chair Legislative Labor and Public Employees Committee State Capitol Hartford, CT 06106 Dear Governor Malloy, Senator Prague and Representative Zalaski: Pursuant to Conn. Gen. Stat. § 31‐57h and on behalf of the Joint Enforcement Commission on Employee Misclassification (“JEC”) and the Employee Misclassification Advisory Board, enclosed please find a copy of the second annual report of the JEC. As the report indicates, employee misclassification is a serious, statewide problem. The JEC, a cooperative effort among state agencies, labor and management, is developing methods and strategies to effectively and efficiently combat employee misclassification. We look forward to continuing to work with you in this effort. If you have any questions, please contact me. Sincerely,

Glenn Marshall, Commissioner Connecticut Labor Department Chair, Joint Enforcement Commission GM/scl

Table of Contents

Executive Summary

dvisory Board

Page 1

age 1 Meetings of the Joint Enforcement Commission and A

ccomplishments of Joint Enforcement Commission 010 to February 2011

P

Afor Report Year March 2

s/Activities

Page 2

Future Step

Page 3

Conclusion

Page 4

2 Appendix A: Minutes of March, April and May 2010 Meetings

-1

Appendix B: Overview of Enforcement Authority & JEC Members Appendix C: Public Act 10-12

Page 13-22 Page 23-24

Report from the Joint Enforcement Commission on Employee/Worker Misclassification ‐ 2011

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Executive Summary Employee/worker misclassification occurs when an employer classifies a worker as an independent contractor rather than an employee. While employee/worker misclassification may sound like a mere paperwork issue, the act of misclassifying an employee is a serious and significant problem, affecting workers, businesses, and taxpayers. To address this issue, in June 2008 the Joint Enforcement Commission on Employee Misclassification (Commission) was established under Connecticut General Statutes 31‐57h and given the task of reviewing the problem of employee misclassification by employers for the purposes of avoiding their obligation under state and federal labor employment and tax laws. The Commission was further assigned the duty of coordinating the civil prosecution of violations of state and ederal laws as a result of employee misclassification. It shall also report any fsuspected violation of state criminal statutes to the Chief State’s Attorney. The Commission is comprised of the Labor Commissioner, the Commissioner of evenue Services, the Chairperson of the Workers’ Compensation Commission, the

. RAttorney General and the Chief State’s Attorney, or their designees There was also established the Employee Misclassification Advisory Board (Advisory Board) pursuant to section 31‐57i of the Connecticut General Statutes. The Advisory Board shall consist of members representing management and labor in the construction industry. The initial Advisory Board members were: Donald Shubert, President of Connecticut Industry Association; Benedict Cozzi, Business Manager and President, International Union of Operating Engineers; Charles LeConche, Business Manager for the Connecticut Laborer’s District Council; Glenn Marshall, President, Carpenter’s Local #210; Michael Riley, President of Motor Transport Association of Connecticut; and David DiScala, Vice‐President of A.V. rucking Builders. The terms of these members run concurrently with those of the ppointing authority. Ta Meetings of the Joint Enforcement Commission and Advisory Board During the report year of February 2010 to February of 2011, there were three (3) eetings of the Commission and Advisory Board. The minutes for these three m

meetings can be found in Appendix A of this report. The first meeting was held on March 1, 2010. Discussion was held on a legislative roposal to increase the penalties for intentional worker misclassifications and on pother initiatives of the Commission. he second meeting was held on April 1, 2010 with much discussion over eveloping a simple database to log in complaints. Td

Report from the Joint Enforcement Commission on Employee/Worker Misclassi�ication - 2011

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The third meeting of the Commission and Advisory Board was held on May 13, 2010 at the Chief State’s Attorney’s Of�ice. There was a discussion concerning complaints received by the Commission and also regarding the passing of P.A. 10-12 which increased the penalties for violation of

orker compensation laws. The Commission also went over how resources can be sed to spotlight certain industries.

wu Af

ccomplishments of Joint Enforcement Commission or f o Report Year o March of 2010 to February f 2011

A website has been created which provides information on worker misclassi�ication, a complaint form and frequently asked questions as well as a link to the annual report.

Legislation was passed in Public Act 10-12 to increase the penalty for each day

of performing work without proper worker’s compensation coverage by fraudulently misclassifying workers as independent contractors and designating the State of Connecticut as a victim. This was a signi�icant statutory change as the Commission had received substantial feedback from the business community that existing penalties were insuf�icient to deter knowing misclassi�ication violations.

The Stop Work Unit at the Labor Department issued 127 stop work orders for

misclassifying workers with the intent to avoid legal obligations relating to employment. As a result of these stop work orders, $38,700 was collected in civil penalty funds. The unit also worked jointly with the Liquor Control agents where workers were not listed on the payroll and there were violations of liquor control laws. Additionally in conjunction with the State of Massachusetts a contractor doing business in both states was investigated on the same day with stop work orders being issued in both states.

The Department of Labor’s Unemployment Insurance Tax Division enforces Connecticut’s unemployment compensation laws under Title 31, Chapter 567 of the Connecticut General Statutes. It has approximately 100 staff in 13 locations throughout the state. The Tax Division conducts investigations based on a

variety of audit sources.

This includes a random compliance audit program, whereby a certain percentage of the state’s registered employers are selected for audit each year. In addition, investigations are conducted when individuals �ile claims for unemployment compensation bene�its and discrepancies are noted in their reported earnings amounts, or their earnings are not reported at all. Audits also are conducted based on referrals from other divisions within the Labor Department, other state and/or federal agencies, and complaints received from a


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variety of sources. Additionally, per a requirement of the United States Department of Labor, the Division also has a team that audits large employers conducting business in Connecticut.

From March 1, 2010 through February 28, 2011 the Tax Division’s Field Audit Unit completed approximately 1,600 audits and another 9,000 individual wage complaint investigations. Those investigations resulted in the reclassification of approximately 6,500 workers and the discovery of roughly $50 million in previously unreported or underreported payroll.

The Department of Revenue Services BETA Unit conducted worker

misclassification investigations. The additional tax, penalty and interest assessed totaled $611,568.50. The Department currently has 22 additional misclassification cases that are pending as a result of referrals from the Joint Enforcement Task Force.

The Stop Work Unit at the Labor Department has successfully coordinated

targeted enforcement sweeps in towns and cities by obtaining work permits issued by building officials.

Future Steps/Activities The Commission will continue to work to eliminate the problem of worker isclassification through legislation, increased enforcement, data‐sharing and m

education.

lan i s : P

ned activ tie include

Continue to analyze the current penalty structure for non‐compliance and recommend new legislation if there is not a sufficient deterrent to stop the illegal misclassification of employees.

Continue strategic and coordinated enforcement in industries that have historically demonstrated high incidence of worker misclassification.

Conduct research to help identify other industries with a high incidence of

misclassification.

Work with other states to pursue employers that operate in multiple jurisdictions.

Further efforts relating to inter‐agency training in areas such as, but not limited to, investigation safety, legal issues, investigative techniques, field communication procedures and construction practices.


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Increase education and outreach to the business community, including small businesses, to raise awareness of the problems of misclassification.

Continue to identify additional entities, both governmental and private, that can

help to monitor and participate in education and enforcement activities.

Improve processes for sharing information and maximizing resources of state and federal agencies.

Conclusion The Commission recognizes that worker misclassification is an expanding problem that adversely affects businesses and workers. During the 12 months ended February 28, 2011, the Commission has actively enforced employment laws relating to proper worker classification to ensure that each worker is afforded proper protections under the law and to ensure that every organization has an equal opportunity to compete on a level playing field for business in Connecticut. We have developed coordinated enforcement and data‐sharing strategies working with Commission agencies and with other state and federal agencies as well. In the coming year the Commission seeks to improve on these efforts as we attempt to create an economic climate that protects workers’ rights and promotes healthy business competition.


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Appendix A: Minutes of March, April, and May 2010 Meetings

Misclassification Commission and Advisory Board Meeting Connecticut Department of Labor

March 1, 2010 Minutes

Commission Members present: Richard Nicholson, Deputy Commissioner of Revenue Services; John Mastropietro, Chairperson of the Workers’ Compensation Commission; Richard Kehoe for Richard Blumenthal, Connecticut Attorney General; Gary Pechie, for Acting Labor Commissioner Linda Agnew, Connecticut Labor Department, and John L. DeMattia, John Torento, Keith McCurdy, Ernest T. Lazaro and William Butka for Kevin Kane, Office of the Chief State’s Attorney.

Board Members present: Michael J. Riley, President, Motor Transport Association of Connecticut, Inc.; Donald Shubert, President, Connecticut Construction Industry Association; and Glenn Marshall, President, Carpenters Union Local #210.

Absent: Benedict Cozzi, Business Manager and President, International Union of Operating Engineers; Charles LeConche, Business Manager for the Connecticut Laborers’ District Council; David DiScala, Vice-President of A.V. Tuchy Builders, Inc.

Agency Staff: Carl Guzzardi, UI Tax Division; John Biello and John Kutsokos, Department of Revenue Services; Nancy Bonuomo and Madeleine Lemieux, Workers’ Compensation; James Eatherton and Maria Greenslade, Second Injury Fund; Krista O’Brien, Assistant Attorney General; Marisa Morello, CTDOL Legislative Liaison; and Stephen Lattanzio, Program Policy.

Observers: Nate Brown and Duane Gates International Union of Operating Engineers; Butch Granell, Laborers Union District Council No. 11; and Jim Lohr, New England Regional Council of Carpenters.

Wage and Workplace Standards Division Director Gary Pechie called the meeting to order at 2:09 p.m., asked everyone present to sign in on an attendance sheet, and welcomed members of the Commission, Advisory Board and others present to the Office of the Chief State’s Attorney in Rocky Hill, CT. Mr. Pechie asked if the minutes from the last meeting (1/21/10) were acceptable, and the minutes were approved by a motion and second, and thereafter by voice affirmation of the majority of members present.

Mr. Pechie asked Commission and Advisory Board members to remark on any old business. Mr. Pechie informed attendees of a February 1, 2010 letter submitted to the Acting Labor Commissioner on behalf of the Taskforce by the Legislative Program Review and Investigations Committee requesting the status of a referral on taxicab drivers. Commissioner Nicholson inquired whether it was appropriate for the taskforce


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to discuss this issue because DRS would be constrained by its confidentiality rules. Mr. Kehoe suggested that attendees review the Program Review Report, consider the information compiled and discuss it at a future subgroup meeting of the agencies on the taskforce. Commissioner Nicholson agreed, as did Mr. Riley, who opined that the taskforce may not be the proper forum of such a referral. Mr. Mastropietro stated that the Worker’s Compensation Commission would have to refrain from participation in any action taken by the taskforce that was analogous to the issuance of declaratory ruling without a sufficient factual basis. It was agreed that the issue of the referral would be brought up at the next meeting of the subgroup of agencies.

Mr. Pechie described the Annual Report which was filed with the legislature, and discussed its contents. It was the consensus of attendees to commence with interagency training and education, the construction of a database and web site development.

Mr. Pechie and Mr. Kehoe informed attendees that a public hearing of the Labor and Public Employees Committee was scheduled on March 4, 2010, at which time legislative proposals from the taskforce might be presented for legislative consideration.

Mr. Kehoe explained the first proposal consisting of modifying the penalty provision of Conn. Gen. Stat. § 31-69a to consider each day of a violation of § 31-288(g) to constitute a separate offense. A discussion ensued on the merits of the proposal, and whether the increased penalty was triggered by a knowing violation by the employer. Commissioner Nicholson inquired as to the effective date of such legislation, if passed, and it was deemed likely to be effective October 1, 2010, and apply only to suspected violations committed on or after that date.

A second legislative proposal was offered by Mr. DeMattia of the Office of the Chief State’s Attorney. He and colleagues proposed modifying Conn. Gen. Stat. § 31-288(g) so as to include the Worker’s Compensation Commission and the Second Injury Fund as potential victims of any violations of the statute for purposes of criminal prosecution. Mr. DeMattia explained that a portion of unpaid worker’s compensation premiums illegally diverted revenue from the state and possibly constituted the crime of defrauding a public community. Ms. Greenslade requested the opportunity to review the proposed final draft language to determine how it might affect the Second Injury Fund.

It was the consensus of attendees that each legislative proposal was satisfactory as a concept, and that the specific draft language would be circulated to individual members of the Commission and Advisory Board following the meeting. It was anticipated that taskforce members would comment on the final language by e-mail to each other prior to the public hearing on March 4, 2010. Mr. Mastropietro asked whether anyone on the taskforce would be testifying in person, or whether testimony would consist solely of a written submission. Mr. Marshall indicated that he would be testifying at the public hearing, but not as a designated representative of the task force.

It was suggested that the Commission meet again in late March, 2010.

Mr. Pechie then adjourned the meeting at 3:33 p.m.


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Misclassification Commission and Advisory Board Subgroup Meeting

(CTDOL, DRS, Workers’ Compensation, Second Injury Fund, Chief State’s Attorney and Attorney General)

Connecticut Chief State’s Attorney’s Office April 1, 2010

Minutes Commission Designees present: Jeff Wojtusik, IT, DRS, and Andrew Black DRS; Division; John Mastropietro, Workers’ Compensation; Madeleine Lemieux, Workers’ Compensation; Richard Kehoe, Assistant Attorney General; John Torento, Keith McCurdy and John DeMattia, Office of the Chief State’s Attorney; James Eatherton, Cindi Lloyd, Second Injury Fund. Agency Staff: Resa Spaziani, Wage and Workplace Standards Division; Ariel Morales, Wage and Workplace Standards Division; Marisa Morello, Labor Department Legislative Liaison; NEXT MEETING OF SUBGROUP and FULL ADVISORY BOARD: Thursday, May 13th

1:00 – 1:30 PM (agencies only) 1:30 PM (full advisory board) Location: Office of the Chief State’s Attorney

John Mastropietro, Workers’ Compensation Chairman called the meeting to order shortly after 1:15 P.M. and welcomed the subgroup members. He asked DRS to provide an update on the shared database of complaints. Jeff Wojtusik and Andrew Black of DRS said that DRS went to DOL to discuss the database. DOL told DRS that DOIT should be the lead agency to develop the database and that there is a specific protocol that must be followed. John Mastropietro asked if the IT Dept at DOL could work with DOIT to develop the database and he asked if Resa Spaziani can let the Misclassification Task Force members know that they each would need to have a liaison as a contact for the database. Rich Kehoe arrived and began to chair the meeting. Rich asked DRS about the format of the shared database. Jeff Wojtusik and Andrew Black explained that the shared database of complaints is in an access database format so not everyone can access it at the same time. DOIT must change the status of the database so everyone can access it at the same time. John Mastropietro asked that the Misclassification Task Force send a letter to the DOIT Commissioner asking for assistance regarding the shared database of complaints. He will draft the letter for review.


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Rich Kehoe moved to the next agenda item and provided a legislative update on the status of H.B. # 5204: An Act Implementing the Recommendations of the Joint Enforcement Commission on Employee Misclassification. Rich explained that the bill was referred to the Judiciary Committee for a vote. (The Judiciary Committee has subsequently voted the bill favorably out of Committee on April 7th, 2010 by a vote of 40-0. The House of Representatives then unanimously voted on the bill on April 13th, 2010 by a vote 0f 148-0. The Bill was amended by House Amendment Schedule “A” which clarifies that the increase in the civil penalty in the bill only applies to employee misclassification. H.B. # 5204 was given a new File # 547 and is awaiting action by the State Senate). Rich Kehoe moved to the next agenda item and discussed the website for information and complaint filings. He handed out Gary Pechie’s draft of website information for review. He asked that everyone review the draft and provide comments by 4/15/10. Rich explained that the goal is that other state agencies will be able to link onto DOL’s website and the Misclassification Complaint Form. Rich will send the link to the Advisory Board Members once the webpage is functional. Resa Spaziani said that it would not be difficult to add another information page on worker misclassification onto the Wage and Workplace Standards Division website. Rich Kehoe moved to the next agenda item to discuss training and joint investigation efforts. Rich asked about the status of the joint investigation efforts. Resa Spaziani said that DOL has conducted a few investigation efforts with DRS on multiple construction sites. DRS said that they have ongoing audits and are interested in keeping them going. 2nd Injury Fund said that they are currently working with a restaurant and are providing information to other organizations. Rich Kehoe said that it would be helpful to include results of these investigation efforts on the Misclassification Task Force website. Rich Kehoe asked about outstanding training issues. Resa Spaziani volunteered to conduct OSHA-10 training for anyone interested. John Torento and Keith McCurdy from the Office of the Chief State’s Attorney would like to train people in criminal investigation techniques. Resa Spaziani said that she would like to take that course and she explained what is included in an OSHA-10 training course.


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Rich Kehoe said that DOL and OCSA can coordinate and have agency people sign-up for a two-day training session: OSHA-10 = one full day and one ½ day training session OCSA criminal investigation = ½ day training session

Dates for next meeting: Rich Kehoe suggested that the next meeting be held after the legislative session and offered Thursday, May 13th. The agency subgroup will meet first at 1:00 – 1:30 PM in order to update on activities and the full advisory board will meet at 1:30PM. Rich Kehoe adjourned the meeting at 1:47 p.m.


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Joint Enforcement Commission (“JEC”) and Advisory Board Committee Meeting

Connecticut Chief State’s Attorney’s Office May 13, 2010

Minutes Commission Designees present: Richard Nicholson, Commissioner, Jeff Wojtusik, and Andrew Black, Department of Revenue Services; John Mastropietro, Nancy Bonuomo and Madeleine Lemieux, Workers’ Compensation; Richard Kehoe and Krista O’Brien, Assistant Attorneys General; John Torento, Ernest T. Lazaro and John DeMattia, Office of the Chief State’s Attorney; James Eatherton, Second Injury Fund; Gary Pechie, Director, Wage and Workplace Standards Division, and Carl Guzzardi, Director, UI Tax Division, Connecticut Labor Department. Board Members: Matthew Hallisey, CCIA Agency Staff: Marisa Morello, Labor Department Legislative Liaison and Stephen Lattanzio, Connecticut Labor Department. Observers: Butch Granell, Connecticut Laborer’s District Council and Jim Lohr, CLMP. TENTATIVE DATE OF NEXT MEETING OF SUBGROUP and FULL ADVISORY BOARD: Thursday, June 17th

1:00 – 1:30 PM (agencies only) 1:30 PM (full advisory board) Location: Office of the Chief State’s Attorney

Gary Pechie of the CTDOL called the meeting of the JEC enforcement agencies to order at 1:09 P.M. and welcomed the subgroup members. He explained that the computer data base is installed on the Wage and Workplace Standards Division (“WWSD”) computer system, and that three complaints from the public have been received to date. Currently, there is no means by which to exchange database information with other enforcement agencies except by physically downloading information from the WWSD computers. John Mastropietro, Workers’ Compensation Chairman, reported that he had consulted with DOIT regarding the JEC’s request for assistance in creating a database which can be shared by all enforcement agencies. Chairman Mastropietro indicated that DOIT understood the request, and was willing to provide assistance when resources became available. The Chairman stated that he will make arrangements for the DOIT designees of the JEC enforcement agencies to meet to discuss how to create a shared database for all enforcement agencies.


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Mr. Pechie then described the nature of the three complaints that have been received to date on the database. The first complaint concerned a home health aide agency, and an extensive discussion ensued regarding the difficult issues involved in determining the employing entity in this particular industry. It was noted that Labor, Workers’ Compensation and DRS experience similar problems with misclassification issues in the health field industry. Assistant Attorney General Kehoe posited that it may be of benefit for the JEC to engage in an outreach program with the AARP or a similar organization in an effort to educate the elderly population of the risks inherent in this particular industry. Chief State’s Attorney John DeMattia suggested that the JEC might desire to “get out front” on this issue. DRS Commissioner Nicholson inquired if there were an industry model followed by a majority of health providers, and it was determined that there was no general model, but rather the employment relationship depended on the facts of each particular case. It was concluded that the health care industry is a unique field that merits its own meeting at a future date. Mr. Pechie stated that the second complaint concerned automobile appraisers, and that the third complaint originated from the State of California and was not directed to any particular scenario within Connecticut. At 1:48 p.m., the meeting of the JEC enforcement agencies adjourned, and the meeting of the JEC and Advisory Board commenced. The minutes from the April 1, 2010 meeting were adopted. DOL Legislative Liaison Marisa Morello provided an update concerning the adoption of P.A. No. 10-12. Mr. Pechie reviewed that the JEC database was currently in existence and was housed within the DOL, and that the JEC was working with DOIT to make it accessible to the other enforcement agencies. Mr. Pechie stated that the WWSD also had a link on its site which provided information regarding the JEC, such referral forms, FAQ’s and contacts. A discussion ensued concerning the manner in which this website might be publicized, and it was suggested that placing the website on the “CT.gov” website be explored. AAG Kehoe also suggested the possibility of a joint press release. Mr. Pechie inquired whether the JEC enforcement agencies possessed the necessary safety equipment, e.g., hardhats, jackets, boots, etc., to engage in on-site construction investigations of joint targets, and it was determined that such equipment is presently lacking. Mr. Pechie and Carl Guzzardi indicated that they had accepted an invitation from USDOL to participate in a misclassification conference in Washington, D.C. on May 27, 2010. Ms. Morello stated that USDOL may make grant money available to states like Connecticut which have undertaken misclassification taskforce initiatives.


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A discussion of the referral from the Legislative Program Review and Investigations Committee concerning the taxicab industry then took place. It was noted that there are no complaints pending with any JEC enforcement agency at present from employees engaged in this industry. Mr. Guzzardi highlighted the difficulty in auditing employers in this industry because unlike most other employment relationships, the business records to be reviewed in this industry are actually provided by the drivers. Therefore, an audit may not be successfully performed in the absence of accurate records from each and every driver. It was decided that an audit of this industry as requested by Program Review would be a major undertaking of the JEC which current resources and priorities did not presently permit. Commissioner Nicholson and Chairman Mastropietro suggested that the JEC notify Program Review that the JEC cannot presently review the taxicab industry independently, but that it would examine any complaints received by drivers as a matter of course. AAG Kehoe suggested that a draft response to Program Review by co-signed by all JEC members. Mr. Pechie stated that he possessed a hard copy of a report on the subject of misclassification authored by Northeastern Law School which he would make available to anyone upon request. The meeting adjourned at 2:36 p.m.


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Appendix B: Overview of Enforcement Authority

and JEC Members

CT Department of Labor, Wage and Workplace Standards Division

The Department of Labor’s Wage and Workplace Standards Division enforces all wage and hour laws under Title 31, Chapter 558 of the State Statutes. One of the ways it enforces proper worker classification is under 31-76a as amended by P.A. 07-89. This authorizes the Labor Department to stop the work of any company that misclassifies workers as independent contractors or under reports payroll as fraud to avoid workers’ compensation coverage and/or premium. The Division has created a Stop Work Unit from current resources to enforce this new law. The Stop Work Unit receives leads from various sources and conducts site inspections. Using laptops, the unit can check on workers’ compensation coverage and payroll information from a specific worksite, and immediately shut down the company if it is not in compliance. Unemployment records to show payroll, as well as whether a company is properly registered, can also be verified. Business records can be requested to be sent to the Labor Department.

Sec. 31-76a. Investigations on complaint of nonpayment of wages and certain misrepresentations re employees. Issuance of stop work order.

(a) On receipt of a complaint for nonpayment of wages or a violation of the provisions of subsection (g) of section 31-288, the Labor Commissioner, the director of minimum wage and wage enforcement agents of the Labor Department shall have power to enter, during usual business hours, the place of business or employment of any employer to determine compliance with the wage payment laws or subsection (g) of section 31-288, and for such purpose may examine payroll and other records and interview employees, call hearings, administer oaths, take testimony under oath and take depositions in the manner provided by sections 52-148a to 52-148e, inclusive.

(b) The commissioner or the director, for such purpose, may issue subpoenas for the attendance of witnesses and the production of books and records. Any employer or any officer or agent of any employer, corporation, firm or partnership who willfully fails to furnish time and wage records as required by law to the commissioner, the director of minimum wage or any wage enforcement agent upon request, or who refuses to admit the commissioner, the director or such agent to the place of employment of such employer, corporation, firm or partnership, or who hinders or delays the commissioner, the director or such agent in the performance of the commissioner's, the director's or such agent's duties in the enforcement


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of this section shall be fined not less than $100 nor more than $250. Each day of such failure to furnish the time and wage records to the commissioner, the director or such agent shall constitute a separate offense, and each day of refusal to admit, of hindering or of delaying the commissioner, the director or such agent shall constitute a separate offense.

(c) (1) If the commissioner determines, after an investigation

pursuant to subsection (a) of this section, that an employer is in violation of subsection (g) of section 31-288, the commissioner shall issue, not later than 72 hours after making such determination, a stop work order against the employer requiring the cessation of all business operations of such employer. Such stop work order shall be issued only against the employer found to be in violation of subsection (g) of section 31-288 and only as to the specific place of business or employment for which the violation exists. Such order shall be effective when served upon the employer or at the place of business or employment. A stop work order may be served at a place of business or employment by posting a copy of the stop work order in a conspicuous location at the place of business or employment. Such order shall remain in effect until the commissioner issues an order releasing the stop work order upon a finding by the commissioner that the employer has come into compliance with the requirements of subsection (b) of section 31-284, or after a hearing held pursuant to subdivision (2) of this subsection

(2) Any employer against which a stop work order is issued

pursuant to subdivision (1) of this subsection may request a hearing before the commissioner. Such request shall be made in writing to the commissioner not more than ten days after the issuance of such order. Such hearing shall be conducted in accordance with the provisions of chapter 54.

(3) Stop work orders and any penalties imposed under section 31-

288 or 31-69a against a corporation, partnership or sole proprietorship for a violation of subsection (g) of section 31-288 shall be effective against any successor entity that has one or more of the same principals or officers as the corporation, partnership or sole proprietorship against which the stop work order was issued and are engaged in the same or equivalent trade or activity.

(4) The commissioner shall adopt regulations, in accordance with

the provisions of chapter 54, necessary to carry out this subsection.


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Additional penalties are outlined in accordance with statute 31-69a.

Sec. 31-69a. Additional penalty.

(a) In addition to the penalties provided in this chapter and chapter 568, any employer, officer, agent or other person who violates any provision of this chapter, or chapter 557 or subsection (g) of section 31-288, shall be liable to the Labor Department for a civil penalty of $300 for each violation of said chapters and for each violation of subsection (g) of section 31-288, except that any person who violates (1) a stop work order issued pursuant to subsection (c) of section 31-76a, shall be liable to the Labor Department for a civil penalty of $1,000 and each day of such violation shall constitute a separate offense, and (2) any provision of section 31-12, 31-13 or 31-14, subsection (a) of section 31-15 or section 31-18, 31-23 or 31-24 shall be liable to the Labor Department for a civil penalty of $600 for each violation of said sections.

(b) The Attorney General, upon complaint of the Labor Commissioner, shall institute civil actions to recover the penalties provided for under subsection (a) of this section. Any amount recovered shall be deposited in the General Fund and credited to a separate non-lapsing appropriation to the Labor Department, for other current expenses, and may be used by the Labor Department to enforce the provisions of chapter 557, this chapter and subsection (g) of section 31-288 and to implement the provisions of section 31-4.

CT Department of Labor, Unemployment Insurance Tax Division

The Department of Labor’s Unemployment Insurance Tax Division enforces Connecticut’s unemployment compensation laws under Title 31, Chapter 567 of the Connecticut General Statutes. It has approximately 100 staff in 13 locations throughout the state. The Division’s primary mission is to provide the funding needed to pay benefits to those individuals who become unemployed through no fault of their own and to ensure that all workers who should be covered under the unemployment compensation program are in fact properly classified as employees. This mission is aided by the enforcement efforts of Labor Department Field Audit staff that conduct investigations based on individual unemployment claims and audits to ensure compliance, including proper worker classification.

The Division makes determinations regarding a worker’s employment status in accordance with Connecticut General Statutes Section 31-222(a)(1)(B)(ii), commonly referred to as the “ABC Test.” The test states in pertinent part that an individual shall be deemed an employee… “unless and until it is shown to the satisfaction of the administrator that (I) such individual has been and will continue to be free from control


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and direction in connection with the performance of such service, both under his contract for the performance of service and in fact; and (II) such service is performed either outside the usual course of the business for which the service is performed or is performed outside of all the places of business of the enterprise for which the service is performed; and (III) such individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.”

The Division has the right to inspect the records of any employer. Connecticut General Statutes Section 31-254 provides, in pertinent part… “records shall be open to, and available for, inspection and copying by the administrator or his authorized representatives at any reasonable time and as often as may be necessary. The administrator may require from any employer, whether or not otherwise subject to this chapter, any sworn or unsworn reports with respect to persons employed by him which are necessary for the effective administration of this chapter. In addition, Connecticut General Statutes Section 31-271 provides subpoena authority in the event records are not made available upon request…For the purpose of determining whether an employer is subject to this chapter or whether the reports filed by him are correct or sufficient or for the purpose of determining the amount of contributions due as provided in section 31-270 or for the purpose of determining whether the employer is able to pay outstanding contributions, interest or penalties due under this chapter, the administrator or the executive director may subpoena any person to appear before him or his agent at such place as may be designated in such subpoena to examine such person under oath and he may compel the attendance before him or his agent of any such person and the production of books and papers by subpoena.”

The Tax Division conducts investigations based on a variety of audit sources. This includes a random compliance audit program, whereby a certain percentage of the state’s registered employers are selected for audit each year. In addition, investigations are conducted when individuals file claims for unemployment compensation benefits and discrepancies are noted in their reported earnings amounts, or their earnings are not reported at all. Audits also are conducted based on referrals from other divisions within the Labor Department, other state and/or federal agencies, and complaints received from a variety of sources. Additionally, per a requirement of the United States Department of Labor, the Division also has a team that audits large employers conducting business in Connecticut.

CT Department of Revenue Services

The Department of Revenue Services enforces Connecticut’s income tax withholding laws under Title 12, Chapter 229 of the Connecticut General Statutes. Specifically Sections 12-705 through 12-707 and the regulations adopted there under.

In August of 2005 the Audit Division launched a strategic plan to implement a withholding tax audit program as a means to address the tax gap with respect to employment taxes. The tax gap is defined as the difference between the tax that


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taxpayers owe and what is actually paid in a timely manner. The Business and Employment Tax Audit unit (BETA) was created to implement this program. Currently, the BETA unit is staffed with 16 Revenue Examiners to address Connecticut income tax withholding issues such as worker misclassification, underreporting or failure to report tax withheld, nonresident employers who fail to withhold Connecticut income tax from workers who perform services within Connecticut, and payments for services that are made in cash.

Worker misclassification has been an issue of great concern for the Department of Revenue Services. Significant underreporting of Connecticut income tax results when workers are not properly classified. The Department of Revenue Services determines a workers status by the application of the common law standard.

This standard, which utilizes a series of factors, essentially asks whether the employer has the right to direct and control the worker. It is imperative that the status of a worker be determined properly to ensure that workers as well as businesses can meet all of their tax responsibilities timely and accurately.

Workers’ Compensation Commission & Second Injury

The Workers’ Compensation Commission’s involvement in matters pertaining to the misclassification of employees is more limited than that of the other members of the JEC. Most often the Workers’ Compensation Commission’s awareness of the misclassification of an employee occurs late in the work relationship, and unfortunately after there is a claim that a worker has sustained an injury arising out of and in the course of employment. Further, even when an instance of misclassification is alleged the Commissioner does not have the authority to determine if other workers at a work site must be covered by a Workers’ Compensation insurance policy. The Commission’s role is more in the nature of providing referrals for investigations as described below, and serving as the arbiter for an employer’s failure to carry Workers’ Compensation insurance.

While the resulting harm from the misclassification of employees resounds at a number of economic levels, the Workers’ Compensation Commission primary concern is the injured worker. Fortunately, for the misclassified worker who is otherwise entitled to Workers’ Compensation benefits, Connecticut’s legislature long ago provided a mechanism for assuring that such individuals would receive the remedy to which they are entitled. The Second Injury Fund, created by the legislature, is used when an employer cannot or will not pay benefits, and provides injured workers with medical care and other benefits to which they may be entitled.

The Workers’ Compensation Act provides that each employer must comply with the insurance and self insurance requirements of the Act. Pursuant to Section 31-288(c) any employer that fails to comply with the compulsory insurance requirements of the Act is subject to a civil fine of “not less than $500 per employee or $5,000,


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whichever is less and not more than $50,000 against the employer.” Arguably, an entity that does not properly classify its workers as employees is not in compliance.

Sec. 31-288 provides in pertinent part:

(c) Whenever an investigator in the investigations unit of the

office of the State Treasurer, whether initiating an investigation at the request of the custodian of the Second Injury Fund, the Workers’ Compensation Commission, or a commissioner, finds that an employer is not in compliance with the insurance and self-insurance requirements of subsection (b) of section 31-284, such investigator shall issue a citation to such employer requiring him to obtain insurance and fulfill the requirements of said section and notifying him of the requirement of a hearing before the commissioner and the penalties required under this subsection. The investigator shall also file an affidavit advising the commissioner of the citation and requesting a hearing on such violation. The commissioner shall conduct a hearing, after sufficient notice to the employer and within thirty days of the citation, wherein the employer shall be required to present sufficient evidence of his compliance with said requirements. Whenever the commissioner finds that the employer is not in compliance with said requirements he shall assess a civil penalty of not less than $500 per employee or $5,000, whichever is less and not more than $50,000 against the employer.

The process for levying a fine for non-compliance is accomplished through a series of steps outlined in Section 31-288(c). Whenever the Workers’ Compensation Commission receives a complaint, it is forwarded to the Assistant Deputy Treasurer. The Assistant Deputy Treasurer forwards the complaint to the Second Injury Fund Investigative Unit. A Second Injury Fund Special Investigator then inquires as to whether an employer has an active Workers’ Compensation insurance policy or is self insured. If the Second Injury Fund Special Investigator determines that there is probable cause to believe that an employer has not complied with the Act’s requirements, a citation is issued and a hearing requested before a Workers’ Compensation Commissioner.

A hearing is then held before a Workers’ Compensation Commissioner and the Commissioner determines the amount of the fine to be levied against the non-compliant employer if the employer has been unable to demonstrate that he in fact was in compliance. As noted in Section 31-288(c), a commissioner may assess a civil penalty of “not less than $500 per employee or $5,000, whichever is less and not more than $50,000 against the employer.” The amount of the penalty assessed against a non-compliant employer is dependent upon a number of factors. In determining the amount of such a fine, a commissioner will consider the following:


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• Number of employees. • What is the present premium rate? • What is the nature of the employer’s business? • Are employees exposed to hazardous materials, unsafe conditions or at some

greater risk for a workplace injury? • How long has the employer been in business? • What would the premium rate have been in the past or for the period in which the

employer was without insurance? • How long was the employer without insurance coverage? • What were the circumstances surrounding the employer’s failure to carry insurance? • Was this a failure to renew and if so what were the circumstances surrounding the

failure to renew? • Has there been a change in ownership or the business enterprise which may have

affected the need to carry insurance? Assuming that a commissioner concludes that the employer has not complied with the Act’s insurance/self insurance requirements, the commissioner will then assess an appropriate civil penalty in accordance with the amounts permitted by statute.

Additionally, Section 31-288(d) provides that in the event the employer fails to comply with the Act’s insurance/self-insurance requirements following a commissioner’s determination of noncompliance the commissioner may assess an additional penalty of $100 per day not to exceed $50,000.

Section 31-288(f) and 31-288(g) also provide for employers who misclassify employees as independent contractors to be subject to criminal prosecution and guilty of a Class D felony.

Sec. 31-288(d):

In addition to the penalties assessed pursuant to subsection (c) of this section, the commissioner shall assess an additional penalty of $100 for each day after the finding of noncompliance that the employer fails to comply with the insurance and self-insurance requirements of subsection (b) of section 31-284. Any penalties assessed under the provisions of this subsection shall not exceed $50,000 in the aggregate.

Office of the Attorney General

Connecticut General Statutes Section 3-125 provides in relevant part that the “Attorney General shall have general supervision over all legal matters in which the state is an interested party, except those legal matters over which prosecuting officers have direction.” In addition, Section 3-125 provides that the Attorney General “shall appear


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for… all heads of departments and… Commissioners… in all suits and other civil proceedings… in which the state is a party or is interested…” Therefore, the Attorney General represents the Commissioner of Labor in all civil legal matters involving the Department of Labor. Chapter 558 of Title 31 of the Connecticut General Statutes provides the Commissioner of Labor with the authority to bring a civil action to collect wages. Specifically, Connecticut General Statutes Section 31-68(a) provides in relevant part that:

The commissioner may collect the full amount of unpaid minimum fair wages or unpaid overtime wages to which an employee is entitled under said sections or order, as well as interest calculated in accordance with the provisions of section 31-265 from the date the wages should have been received, had they been paid in a timely manner. In addition, the commissioner may bring any legal action necessary to recover twice the full amount of the unpaid minimum fair wages or unpaid overtime wages to which the employee is entitled under said sections or under an order, and the employer shall be required to pay the costs and such reasonable attorney’s fees as may be allowed by the court.

Furthermore, Connecticut General Statutes Section 31-72 provides that:

When any employer fails to pay an employee wages in accordance with the provisions of sections 31-71a to 31-71i, inclusive, or fails to compensate an employee in accordance with section 31-76k or where an employee or a labor organization representing an employee institutes an action to enforce an arbitration award which requires an employer to make an employee whole or to make payments to an employee welfare fund… The Labor Commissioner may collect the full amount of any such unpaid wages… as well as interest calculated in accordance with the provisions of section 31-265 from the date the wages or payment should have been received, had payment been made in a timely manner. In addition, the Labor Commissioner may bring any legal action necessary to recover twice the full amount of unpaid wages…

Based on the foregoing, the Attorney General’s Workers’ Compensation and Labor Relations Department represents the Department of Labor in civil judicial enforcement actions concerning a variety of wage and hour violations. Such violations include, but are not limited to, an employer’s failure to pay wages, failure to pay overtime, failure to pay the minimum wage, failure to pay the prevailing wage, failure to maintain payroll/employment records, or failure to correctly classify employees. In addition to the aforementioned wage and hour claims, the Attorney General also brings suit on behalf of the Department with respect to the Department’s assessment of civil penalties for violations of the wage statutes.

In addition, the Attorney General is authorized to bring a civil action on behalf of the Second Injury Fund of the Treasurer’s office for payments made out of the fund in accordance with Connecticut General Statutes Section 31-355. Such actions may involve an employer who is unable to pay any type of workers’ compensation benefit


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because it failed to correctly classify employees in an effort to avoid paying the proper premium for workers’ compensation insurance. Since the Joint Enforcement Commission on Employee Misclassification became effective on July 1, 2008, the Office of the Attorney General has received 44 claim referrals from the Department of Labor concerning a variety of violations. Of these referrals, five were resolved, and 39 are in various stages of litigation.

Office of the Chief State’s Attorney

The Workers’ Compensation Fraud Unit of the Chief State’s Attorney’s Office was established pursuant to Connecticut General Statute Section 31-290d. The current unit is staffed by three Police Inspectors, one Supervisory Inspector, a Secretary, and a Supervisory Assistant State’s Attorney.

The cases that are routinely investigated by this unit involve violations of Connecticut General Statute Section 53a-290c, Fraudulent Claim or Receipt of Benefits. These cases generally involve claimants who have intentionally misrepresented material facts, in respect to their claims, in an attempt to defraud the insurance company.

The other type of case investigated, although less frequently, is for noncompliance with insurance requirements or for defrauding the workers’ compensation insurance carrier. These violations are covered under Connecticut General Statute Section 31-88, subsections (f) and (g). These cases often are investigated in conjunction with members of the Second Injury Fund.

(f) When any employer knowingly and willfully fails to comply with the insurance and self insurance requirements of subsection (b) of section 31-284, such employer, if he is an owner, in the case of a sole proprietorship, a partner, in the case of a partnership, a principal, in the case of a limited liability company or a corporate officer in the case of a corporation, shall be guilty of a class D felony.

(g) Any employer who (1) has failed to meet the requirements of subsection (b) of section 31-284, or (2) with the intent to injure, defraud or deceive any insurance company insuring the liability of such employer under this chapter, (A) knowingly misrepresents one or more employees as independent contractors, or (B) knowingly provides false, incomplete or misleading information to such company concerning the number of employees, for the purpose of paying a lower premium on a policy obtained from such company, shall be guilty of a class D felony and shall be subject to a stop work order issued by the Labor Commissioner in accordance with section 31-76a.

In addition, criminal arrests often are made by this unit in those cases where the actual workers’ compensation insurance certificate is forged. In these particular cases the


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charge is usually Forgery Second Degree in violation of Section 53a-139 of the Connecticut General Statutes. In some cases the unit has individuals who testify falsely under oath, as in a deposition. The charge for that offense is usually Perjury in violation of Section 53a-156.

JEC Agencies and Advisory Board Members and Appointees

Per Conn. Gen. Stat. § 31-57h, the Joint Enforcement Commission on Employee Misclassification shall consist of the:

(1) Labor Commissioner; (2) Commissioner of Revenue Services; (3) Chairperson of the Worker’s Compensation commission; (4) Attorney General; and(5) Chief State’s Attorney.

(or their designees.)

Per Conn. Gen. Stat. § 31-57i, the Employee Misclassification Advisory Board Members and their Appointees are as of August 1, 2008:

(1) One labor representative appointed by the Governor – Charles LeConche;

(2) One management representative appointed by the Governor – Michael Riley;

(3) One labor representative appointed by Speaker of the House of Representatives – Benedict Cozzi;

(4) One management representative appointed by the Minority Leader of the House of Representatives – Glenn Marshall;

(5) One management representative appointed by the President Pro Tempore of the Senate – Donald Shubert; and

(6) One labor representative appointed by the Minority Leader of the Senate – David DiScala.

Substitute House Bill No. 5204

Public Act No. 10-12

AN ACT IMPLEMENTING THE RECOMMENDATIONS OF THE JOINT ENFORCEMENT COMMISSION ON EMPLOYEE MISCLASSIFICATION.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 31-69a of the 2010 supplement to the general statutes is repealed and the following is substituted in lieu thereof (E�ective October 1, 2010):

(a) In addition to the penalties provided in this chapter and chapter 568, any employer, officer, agent or other person who violates any provision of this chapter, chapter 563a, chapter 557 or subsection (g) of section 31-288, as amended by this act, shall be liable to the Labor Department for a civil penalty of three hundred dollars for each violation of said chapters and for each violation of subsection (g) of section 31-288, as amended by this act, except that (1) any person who violates [(1)] (A) a stop work order issued pursuant to subsection (c) of section 31-76a, shall be liable to the Labor Department for a civil penalty of one thousand dollars and each day of such violation shall constitute a separate offense, and [(2)] (B) any provision of section 31-12, 31-13 or 31-14, subsection (a) of section 31-15 or section 31-18, 31-23 or 31-24 shall be liable to the Labor Department for a civil penalty of six hundred dollars for each violation of said sections, and (2) a

Appendix C:


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Substitute House Bill No. 5204

2 21-01 .oN tcA cilbuP of 2

violation of subsection (g) of section 31-288, as amended by this act, shall constitute a separate offense for each day of such violation.

(b) The Attorney General, upon complaint of the Labor Commissioner, shall institute civil actions to recover the penalties provided for under subsection (a) of this section. Any amount recovered shall be deposited in the General Fund and credited to a separate nonlapsing appropriation to the Labor Department, for other current expenses, and may be used by the Labor Department to enforce the provisions of chapter 557, chapter 563a, this chapter and subsection (g) of section 31-288, as amended by this act, and to implement the provisions of section 31-4.

Sec. 2. Subsection (g) of section 31-288 of the general statutes is repealed and the following is substituted in lieu thereof (E�ective October 1, 2010):

(g) Any employer who (1) has failed to meet the requirements of subsection (b) or (c) of section 31-284, or (2) with the intent to injure, defraud or deceive any insurance company insuring the liability of such employer under this chapter or the state of Connecticut because of failure to pay workers' compensation assessments in accordance with the provisions of section 31-345 or Second Injury Fund assessments in accordance with the provisions of section 31-354, (A) knowingly misrepresents one or more employees as independent contractors, or (B) knowingly provides false, incomplete or misleading information to such company concerning the number of employees, for the purpose of paying a lower premium on a policy obtained from such company, shall be guilty of a class D felony and shall be subject to a stop work order issued by the Labor Commissioner in accordance with section 31-76a.

Approved May 5, 2010


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