Some work involves greater risk of accidents and injury. Let's face it, working in an office is not usually as potentially dangerous as working on a construction site (that is why they call them "hard-hat areas.")
Misclassification is a form of workers' compensation fraud. It takes various forms. Some employers whose companies do work in which accidents are more likely or more likely to be severe, may mislabel their employees as being in other occupations. Then there are those employers who characterize their workers as "independent" contractors. Both methods could be used to decrease workers' compensation exposure. Some contend this Misclassification is a billion dollar problem for the workers' compensation marketplace. The subject is getting a fair amount of attention; David Depaolo recently discussed some interesting misclassification issues in his blog.
WorkersCompensation.com reported recently that Alabama has signed a "memorandum of understanding" with the U.S. Department of Labor Wage and Hour Division (WHD), which "represents a new effort on the part of the agencies to work together to protect the rights of employees . . .." The story says that the WHD led the way to recovery of about $83 million in "back wages for more than 108,050 workers," and that they "regularly find large concentrations of misclassified workers in low-wage industries."
It appears that misclassification is not new, not isolated, and it affects more than just workers' compensation.
Misclassification is a form of workers' compensation fraud. It takes various forms. Some employers whose companies do work in which accidents are more likely or more likely to be severe, may mislabel their employees as being in other occupations. Then there are those employers who characterize their workers as "independent" contractors. Both methods could be used to decrease workers' compensation exposure. Some contend this Misclassification is a billion dollar problem for the workers' compensation marketplace. The subject is getting a fair amount of attention; David Depaolo recently discussed some interesting misclassification issues in his blog.
WorkersCompensation.com reported recently that Alabama has signed a "memorandum of understanding" with the U.S. Department of Labor Wage and Hour Division (WHD), which "represents a new effort on the part of the agencies to work together to protect the rights of employees . . .." The story says that the WHD led the way to recovery of about $83 million in "back wages for more than 108,050 workers," and that they "regularly find large concentrations of misclassified workers in low-wage industries."
It appears that misclassification is not new, not isolated, and it affects more than just workers' compensation.
Florida has been effective at enforcing compliance with workers' compensation coverage requirements. In October, The Florida Division of Workers' Compensation was invited to address the International Association of Industrial Accident Boards and Commissions (IAIABC) at their 100th annual conference in Austin, Texas. According to Workcompcentral, Florida is progressing well in deploying a database designed to facilitate data sharing and to make misclassification harder to conceal.
Allegedly, check-cashing services can be used to facilitate misclassification. Certainly, there is a legitimate purpose for such businesses. People get paid by check but choose not to have a bank account. They need their check converted to currency, and these businesses facilitate that, for a fee. But, there are those who allege that some such businesses are used inappropriately to facilitate the payment to "independent contractors" as part of a Misclassification effort.
Allegedly, check-cashing services can be used to facilitate misclassification. Certainly, there is a legitimate purpose for such businesses. People get paid by check but choose not to have a bank account. They need their check converted to currency, and these businesses facilitate that, for a fee. But, there are those who allege that some such businesses are used inappropriately to facilitate the payment to "independent contractors" as part of a Misclassification effort.
According to the Division's Compliance Bureau Chief, Robin Delaney, addressing Misclassification, "this type of fraud has proliferated in Florida," such that some have dubbed it the "Florida Plan." The "Florida Plan" is a formalization of the misclassification process, conducted through shell-companies and with the help of sophisticated intermediaries. To better understand it, read Did Dirkson Have it Right in this blog.
Bureau Chief Delaney explains that recent Florida legislation has led to the development of a database, which gathers information from "check-cashing businesses." There are provisions that will require reporting from others who are not necessarily appropriate for this label, but whose businesses nonetheless collect and cash checks as a service.
The plan is for this database of check-cashing information to then be "checked against records of other state agencies." It is hoped that this will identify discrepancies between various filings, and is intended to lead investigators to entities that are engaged in the misclassification practice or engaged in facilitating or assisting others with that practice.
There are many perspectives on workers' compensation. Injured workers seek greater benefits and industry generally resists such increases. Payors seek more constraint and control on payment of expenses, and service providers generally resist the layering of greater bureaucracy. There will always be conflicts in the policy questions of workers' compensation. It is by definition a system of limited resources and competing interests. Balances will always be struck and various constituencies will always debate the equities of the balances.
One perspective that is hard to comprehend, however, is the criminal perspective. It is difficult to be sympathetic to those who break the law. Their actions can put human beings at risk directly. When people are hurt, sometimes catastrophically, the provision of immediate and appropriate medical care should be the hallmark of our system. The actions of those who break the law with misclassification may gain for themselves a price advantage that leads to being awarded bids or contracts, to the detriment of law-abiding competitors. The law breakers' actions consume the resources of the state, as enforcement, databases, and auditing are required.
Is there a valid counter-argument in favor of the misclassifiers? If there is, I would like to hear it.
For now, it is gratifying to see Florida regulators working to better enforce the laws for the benefit of workers, legitimate businesses, and the state. I was proud to see the Florida Division recognized by the IAIABC for their efforts.
For now, it is gratifying to see Florida regulators working to better enforce the laws for the benefit of workers, legitimate businesses, and the state. I was proud to see the Florida Division recognized by the IAIABC for their efforts.