By
Troy D. Thompson, Axley Brynelson, LLP, Madison
Sept. 1, 2010 – On May 12, 2010, Gov. Jim Doyle signed into law 2009 Senate Bill 672. The law, which takes effect on Jan. 1, 2011, provides the Wisconsin Department of Workforce Development (DWD) substantial teeth to investigate and address worker misclassification (employee vs. independent contractor) issues involving employers engaged in the construction of roads, bridges, highways, sewers, water mains, utilities, public buildings, factories, housing, or similar construction projects. 2009 Assembly Bill 929 further extends the law to employers engaged in the painting or drywall finishing of buildings or other structures.
Expansion of DWD authority
The new law creates Wis. Stat. section 103.06, which, among other things, will require DWD to:
• Educate employers, employees, nonemployees, and the public about the proper classification of persons performing services for an employer;
• Receive and investigate complaints alleging violations of the requirements for proper classification of employees and investigate alleged violations on its own initiative;
• If DWD finds that an employer is in violation of the law, order the employer to stop work and pay a forfeiture;
• Refer complaints of employee misclassification to other state or local agencies that administer laws whose enforcement depends on the proper classification of employees;
• Cooperate with other state and local agencies in the investigation and enforcement of laws that depend on proper employee classification for enforcement; and
•Appoint attorneys as appeal tribunals to conduct hearings and issue decisions.
To ensure compliance, section 103.06(3) will allow DWD to require an employer to prove that the employer is:
• Maintaining records identifying all persons performing work for the employer, including the name, address, and social security number of each person;
• Maintaining worker’s compensation coverage required for its employees;
• Providing DWD with information required for the state hiring reporting system;
• Maintaining records of the hours worked by its employees, the wages paid to those employees, any deductions made from those wages, and any other information that the employer is required to keep under rules promulgated under state law; and
• Complying with state unemployment provisions.
In conducting an investigation, DWD will be able to do any of the following pursuant to Wis. Stat. section 103.06(4):
• Enter and inspect any place of business or any place of employment and examine and copy required records and other records relating to compliance with worker classification requirements;
• Determine and identity the activities of any person performing work at any location where the work was being performed; and
• Interview and obtain written statements from any employer or person performing work or present at any location where the work was being performed with respect to the names and addresses of the workers, the payment of wages to and hours recorded by the workers, and any other information relating to the remuneration of the workers and the nature and extent of the services performed by such workers.
Stop work orders without hearing
Section 103.06(5) is a controversial provision in the law, authorizing DWD to issue stop work orders prior to any hearing. If, after an investigation, DWD determines that an employer has failed to demonstrate compliance with any of the provisions of section 103.06(3)(a), DWD may serve on the employer a notice of intent to issue a stop work order. Wis. Stat. section 103.06(5)(a). The notice must advise the employer that the stop work order will be issued within three business days after the date of the notice unless, within that timeframe, the employer provides information satisfactory to DWD indicating that the employer is in compliance with the law.
In the event DWD issues a stop work order, the employer may request a hearing before an appeal tribunal by filing a written appeal in a manner to be described in the stop work order. Wis. Stat. § 103.06(5)(b). The written appeal must be filed with DWD within 10 days after service of the stop work order. Wis. Stat. § 103.06(6)(a). DWD is required to hold a hearing on a timely appeal within 14 days after receipt of the appeal. The appeal tribunal is required to issue a written decision within seven days after the hearing. Wis. Stat. § 103.06(6)(b). An employer who violates a stop work order can be exposed to a forfeiture of $1,250 per day for each violation. Wis. Stat. § 103.06(6)(e).
Bottom line
A covered employer can minimize its liability exposure now by analyzing whether it can meet its burden of establishing independent contractor status under the various legal tests that apply to it. The criteria used to determine whether an individual is an employee or a bona fide independent contractor differ depending upon the law under which the analysis is made. For example, an individual may be considered an independent contractor for tax purposes, but considered an employee for worker’s compensation, unemployment, wage and hour, or other purposes. Generally speaking, it is the employer’s burden to establish the existence of a bona fide independent contractor relationship. The label used by the parties is not determinative.
About the author
Troy D. Thompson is a partner with Axley Brynelson, LLP, Madison, and chairs the firm’s Labor and Employment Practice Group. For more information about worker misclassification, contact Troy at (608) 283-6746.
A version of this article was featured in the August 2010 issue of the Wisconsin Employment Law Letter. Reprinted, in part, with permission of M. Lee Smith Publishers, LLC.
Related: Upcoming PINNACLE seminars:
2010 Employment Law Update, Nov. 11 - 12, 2010; and Corporate Practice Institute, Emerging Trends in Employment Law, Dec. 8, 2010
