Six-Agency Task Force Announces Establishment of Anonymous Tip Line for Allegations of Misclassification of Workers as Independent Contractors Instead of as Employees

A six-agency task force established to protect both workers rights and law-abiding businesses that classify their employees properly announced today that it has set up an anonymous telephone tip line for allegations of misclassification.

Staffed by the Rhode Island Division of Taxation, the tip line number is 401-574-8477. Also, the task force is currently building a website to allow people to post tips online.

The chairman of the Joint Task Force on the Underground Economy and Employee Misclassification, DLT Director Charles J. Fogarty, and RI Tax Administrator David M. Sullivan also announced that their agencies have been meeting regularly to share information since the task force came into being in June with the enactment of the FiscalYear 2015 State Budget. The panels purpose is to:

1.      Coordinate joint efforts to combat fraudulent employment activities;
2.      Foster voluntary compliance with the law by educating workers and employers;
3.      Protect the health, safety and benefit rights of workers; and
4.      Protect law-abiding businesses from being undercut by companies that skirt the law. If warranted, an investigation may be referred to the Office of Attorney General.

“One of our major goals is educating, not violating, Rhode Island companies that might unknowingly be misclassifying their workers,” Fogarty said. “At the same time, however, fighting misclassification is an important strategy to promoting shared prosperity in our state.”

“While the vast majority of Rhode Island businesses are playing by the rules, those who arent must be identified and stopped,” said Attorney General Peter F. Kilmartin. “This small number of corrupt businesses is denying workers their basic protections by misclassifying employees in order to evade paying for unemployment benefits and workerscompensation insurance. The result is an uneven playing field that hurts honest and law-abiding employers.”

Tax Administrator Sullivan said, “By using the tip line, workers and others can let us know about employers who are misclassifying workers as independent contractors.  Rest assured that we will follow up on all tips. Businesses that dont play by the rules end up increasing the tax burden on those businesses that do play by the rules. By enforcing our laws, we can help to level the playing field and that helps everyone, including employers and employees.”

Task Force members include the DLT Director, Tax Administrator, Director of the Department of Business Regulation, Attorney General Peter F. Kilmartin, Public Safety Commissioner Colonel Steven G. ODonnell, Chief Judge George Healy of the Workers Compensation Court and the Assistant Director of DLTs Workforce Regulation and Safety division. The panel has held four meetings since its establishment in June.

It must submit an annual report to the Governor and Chairpersons of the House and Senate Finance Committees annually on March 15 summarizing its work during the previous year. Governor Lincoln D. Chafee proposed the task force as a way to address the problem of misclassification of employees as independent contractors. The Governors proposal was finalized in Article 8 of the FY 2015 enacted budget.

A paper issued in August by the nonpartisan National Employment Law Project (NELP) that looked at agency audits in 25 states found that “10 to 30 percent of employers, or even more, misclassify their employees as independent contractors, meaning that several million workers nationally may be misclassified.” Based on a 2009 Government Accountability Office report estimating that independent contractor misclassification cost the federal government $2.72 billion in revenues in 2006, the NELP report said, “State and federal governments lose billions in revenues annually as a result.”

The task force has begun a public education campaign, with DLT and the Division of Taxation each holding recent seminars and DLT mailing an informational flyer in September notifying RIs 32,000 employers of their legal responsibilities. Individually and collectively, the agencies are explaining the differences between employees and independent contractors in order to encourage voluntary compliance with both federal and state laws alike.

In a press release issued earlier this month, the US Department of Labor stated:

“Business models that attempt to change or obscure the employment relationship through the use of independent contractors may not be used to evade compliance with federal labor law. Although legitimate independent contractors are an important part of our economy, the misclassification of employees presents a serious problem, as these employees often are denied access to critical benefits and protections such as family and medical leave, overtime compensation, minimum wage pay, Unemployment Insurance, personal protective equipment and retirement benefits to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often find it difficult to compete with those who are skirting the law.”

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