A new report by the Joint Enforcement Task Force on the Underground Economy and Employee Misclassification (JTF) noted $21.4 million in tax and minimum wage violations during the an 18-month period that ended December 2012. This reflects a surge in fines and other penalties collected from businesses caught violating the state’s labor laws. The increase is attributed in part to ongoing efforts by employers to sidestep labor laws in an uncertain economy.
The range of violations included failure to pay minimum wage and overtime, misclassification of employees as independent contractors, and the skirting of regulations to avoid paying required taxes and insurance. Most of the recovered funds came from companies that failed to pay unemployment insurance taxes.
More labor violations are exposed
In March 2008, Governor Deval L. Patrick established JTF to coordinate the efforts of multiple state agencies to stamp out fraudulent employment activities. The JTF has been effective in exposing local offenders. For example, last year state officials uncovered more than $1.1 million in unreported wages by contractors at Boston’s Marriott Copley Place. In that case alone, Massachusetts collected more than $100,000 in fines and unpaid wages and taxes.
In addition to the construction industry, the JTF report details widespread labor violations that found $11.5 million in unreported wages by companies engaged in everything from home health care to auto sales to adult entertainment.
What employers should know
An employer that fails to properly maintain and report wage, benefit, and tax records runs the risk of hefty fines and exposes the company to lawsuits, which vary in severity depending on:
- the number of employees at issue
- the amount of the wages, benefits, and taxes unpaid by the employer
- prior misconduct
- the employer’s good faith efforts to comply with the reporting requirements
- role of the employer’s officers, directors or principals in violating the reporting requirements
Employers should take special care to comply with the maintenance, reporting, and notification requirements pursuant to the Massachusetts Labor Laws. In addition, employers should correct any issues promptly and take measures to avoid future violations. Failure to do so may result in fines and other penalties, as state agencies step up efforts to expose labor law violations.