Council Passes Workplace Fraud Act
The D.C. Council passed the Workplace Fraud Amendment Act of 2012 in its last session of 2012. The Act responds to construction businesses that misclassify employees in order to rob them of their earned wages and benefits, which is illegal, but still widely practiced.
The Workplace Fraud bill provides for the first time for clear penalties for businesses that misclassify their construction employees as independent contractor. While employees are entitled to minimum wage, overtime, and other protections under the law, independent contractors are supposed to be self-employed, and so are not entitled to these protections. Businesses that misclassify employees as independent contractors also avoid paying social security, workers’ compensation, and unemployment benefits on their behalf.
Currently, too many employers take advantage of workers who are really employees by calling them independent contractors and denying them the benefit of these laws. At least 10% of businesses engage in this kind of workplace fraud, essentially stealing compensation from their workers and defrauding local, state, and national governments of billions of tax dollars a year And the rest of us who follow the law are left to pick up that tab.
Workplace fraud also hurts honest competitors of the businesses that engage in it. Particularly in the ultra-competitive construction industry, businesses that engage in fraud can shave enough off their costs to underbid those who don’t.
The Workplace Fraud bill provides for clear notice to workers of their employment status, clear rules for employers to follow, and better remedies when they are misclassified – all three are important steps toward getting businesses to follow these laws and catching them when they don’t.