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Virginia Task Force Releases Recommendations to Address Worker Misclassification

Virginia Governor Ralph Northam’s Inter-Agency Taskforce on Worker Misclassification and Payroll Fraud has offered 11 recommendations in its report on employee misclassification.

In August 2019, the Governor reconstituted a taskforce charged with providing recommendations on how to “measure and combat misclassification in Virginia.” The Taskforce included representatives from several state agencies, including the Virginia Employment Commission, the Department of Labor and Industry, the Department of Professional and Occupational Regulation, and the Office of the Attorney General.

In its November 22, 2019, report, the Taskforce reiterated sentiments expressed by many other states. It criticized the use of independent contractor arrangements, stating that independent contractor misclassification “creates a competitive disadvantage for Virginia businesses that follow the law, deprives the Commonwealth of millions of dollars in tax revenues …, and prevents workers from receiving protections and benefits to which they legally are entitled.”

According to the Taskforce, “employers reduce their labor overhead as much as 40%” by misclassifying employees as independent contractors. Citing to a 2012 legislative report, the Taskforce observed that worker misclassification results in an estimated $28-million annual loss in state income tax collection alone.

The Taskforce offered the following recommendations aimed at deterring worker misclassification:

  1. Formally adopt and continue applying the IRS test for employment status and assess greater penalties to dissuade worker misclassification.

  2. Eliminate a good faith defense to penalties. According to the Taskforce, penalties should not be reduced or eliminated when an employer received advice and counsel on its business model.

  3. Create a private cause of action that permits misclassified workers to sue for wages, taxes, lost benefits, and attorneys’ fees.

  4. Provide whistleblower protection to those reporting suspected misclassification.

  5. Make misclassification a sanctionable offence for Board of Contractors-licensed firms.

  6. Make businesses that have misclassified workers ineligible to bid on public projects.

  7. Develop uniform investigative and enforcement procedures for agencies and the Taskforce to utilize.

  8. Identify a lead agency to oversee the inter-agency enforcement effort to deter misclassification.

  9. Provide funding to educate and inform the public, employers, and employees on worker misclassification.

  10. Allocate funds to promote investigations, increase inter-agency sharing, and hire staff to support these efforts.

  11. Maintain the Taskforce to monitor and advise on these efforts.

Takeaways

Worker misclassification continues to be a hot-button topic throughout the country and Virginia is no exception. In 2019 alone, legislation relating to independent contractor misclassification were introduced at the federal level and in at least 20 states.

While the report and recommendations do not have the force of law, Virginia businesses can expect greater attention to worker misclassification and efforts to identify and investigate employers who are misclassifying workers. State agencies would be on high alert and use the full spectrum of enforcement mechanisms available to them. The stakes of losing at the agency level are high. Potentially greater fines, legal expenditures, and risk of litigation should have businesses using independent workforce arrangements in Virginia evaluating whether their model is defensible and appropriate for the services they are outsourcing to independent contractors.

The knowledgeable practitioners at Jackson Lewis are available to help your business evaluate its independent workforce arrangements, design and implement sustainable business practices, respond to agency inquiries, and defend the company against misclassification lawsuits.

Jackson Lewis P.C. © 2020

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About this Author

Courtney Malveaux, OSHA Lawyer, Employment, Richmond, Virginia, Jackson Lewis Law Firm
Principal

Courtney Malveaux is a Principal in the Richmond, Virginia, office of Jackson Lewis P.C.

Mr. Malveaux represents employers cited by the Occupational Safety and Health Administration and other regulatory agencies. He also advises and represents employers in employment law matters, including retaliation claims, employment discrimination, unemployment benefits and wage claims. Mr. Malveaux also represents business associations in state and federal legislative and regulatory matters.

Mr. Malveaux represents industry on the Virginia Safety and...

804-212-2862
Adam Lounsbury Employment lawyer Jackson Lewis
Of Counsel

Adam L. Lounsbury is Of Counsel in the Richmond, Virginia, office of Jackson Lewis P.C. He defends employers in class and collective actions against alleged wage and hour violations resulting from misclassification and other workplace-related claims. Over the course of his career, he has represented financial institutions, automobile and consumer product manufacturers, and companies in the transportation, insurance, tech, travel, healthcare and hospitality industries.

Mr. Lounsbury is an accomplished advocate and has litigated cases in state and federal courts throughout the country, including in California, Florida, Montana, New York, South Carolina, Virginia, and West Virginia. He has also arbitrated cases before AAA, ARIAS, FINRA, and JAMS.

Selected Class and Collective Action Experience:

  • Represented a high-end personal concierge service in a putative class action involving claims that its travel agents were misclassified as overtime exempt.
  • Represented an insurance company in a class action alleging its insurance agents were misclassified as independent contractors.
  • Represents a global logistics company in wage and hour class actions involving claims of independent contractor misclassification. 
  • Represents a clinical laboratory in a wage and hour collective action involving claims of independent contractor misclassification.
804-212-2863
D. Paul Holdsworth Associate Richmond Collegiate and Professional Sports General Employment Litigation Workplace Safety and Health
Associate

D. Paul Holdsworth is an Associate in the Richmond, Virginia, office of Jackson Lewis P.C. His practice focuses on representing employers in workplace law matters, including preventive advice and counseling.

Mr. Holdsworth defends employers in employment litigation before state and federal courts and agencies involving claims of harassment and discrimination on the basis of race, gender, religion, national origin, disability, pregnancy, as well as advising and litigating other matters arising under Title VII of the Civil Rights Act, the Age Discrimination in...

804-649-0404