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Criminal Penalties Imposed on Employers for Employee Misclassification

October 26, 2010

In yesterday's blog, our Riverside, California employment attorneys discussed new legislation passed recently in states across the country like Connecticut, New York, and Pennsylvania, where criminal and civil penalties are being imposed on employers for engaging in employee misclassification, by intentionally classifying their employees as independent contractors or "exempt," meaning that the employee is not entitled to overtime pay or other wage and hour benefits that are usually available to non-exempt employees.

Earlier this year, Governor Jodi Rell of Connecticut signed Public Act No. 10-12 into law, implementing the recommendations of the Joint Force Commission on Employee Misclassification, and the Employee Misclassification Act (EMPA). The act increases criminal and civil penalties on employers for misclassifying employers as independent contractors, and became effective as of October 1, 2010.

In Connecticut, any employer who engages in employee misclassification is liable for a civil penalty of $300 for each violation. The EMPA reportedly increases that civil penalty to $300 per day for each violation. Also, any employer who engages in employment misclassification with intent to harm, defraud or deceive the State of Connecticut, in regard to workers' compensation insurance payments, can be guilty of a class D felony and can be subject to a stop work order issued by the Labor commissioner. Any employer who violates a stop work order will also be liable for a civil penalty of $1,000 per day for each violation.

In New York State, Governor David Paterson introduced the Construction Industry Fair Play Act in August, to be signed into law today, on October 26, 2010. Under this act, employers who violate the law willfully, and engage in employee misclassification of its employees, are subject to up to $2,500 in civil penalties for each employee for the first violation, and up to $5,000 for each misclassified worker for the second violation within a five-year period of time. Employers could also be prosecuted criminally, receiving a misdemeanor, for violating the Fair Play Act, with possible penalties of up to 30 days in prison, and up to a $25,000 fine, as well as debarment from Public Work for up to one year for the first violation. Any following misdemeanor offenses could lead to up to 60 days in prison and a $50,000 fine, also with debarment from doing Public Work for an up to five-year period.

Earlier this month, Governor Edward G. Rendell of Pennsylvania, signed H.B. 400, the Construction Workplace Misclassification Act, to make it a third degree felony, for a construction industry contractor to willfully and knowingly engage in employee misclassification. Under this act it will also be a criminal offense to contract with a subcontractor who engages in misclassifying employees. According to the Philadelphia Business Journal, the employers who engage in employee misclassification would be fined $1,000 for the first violation and up to $2,500 for any other violations. The act also reportedly establishes a rigid set of criteria for differentiating employees from independent contractors.

Our attorneys at Howard Law, PC represent individuals who have experienced employee misclassification, and other violations of California Labor Codes in Orange County and throughout Southern California. Contact our Riverside labor and employment attorneys today, for a free consultation about your employment rights.

Pennsylvania Clamping Down on Worker Misclassification, The Philadelphia Business Journal, October 14, 2010

State to Construction Industry: Now is the time to "Play Fair" With Your Workers, New York State Department of Labor, October 26, 2010

Governor Rendell Signs Legislation Establishing the Construction Workplace Misclassification Act, PR Newswire, October 13, 2010

Governor Paterson Signs the Construction Industry Fair Play Act, New York State Department of Labor, September 03, 2010

CT Increases Penalties for Misclassifying Workers, Vision Payroll, June 7, 2010

An Act Implementing the Recommendations of the Joint Enforcement Commission on Employee Misclassification, State of Connecticut House of Representatives File No. 547, April 14, 2010

Related Web Resources:

Department of Labor (DOL): Wage and Hour Division (WHD)

Connecticut Department of Labor

New York Department of Labor

Pennsylvania Department of Labor & Industry