For Immediate Release - December 05, 2012

THE EXECUTIVE OFFICE OF LABOR AND WORKFORCE DEVELOPMENT’S DEPARTMENT OF UNEMPLOYMENT ASSISTANCE FINDS OVER 2,300 MISCLASSIFIED WORKERS AND $11M IN UNREPORTED WAGES

Investigation uncovers non-payment of unemployment insurance and worker misclassification

Boston –December 5, 2012 – The Executive Office of Labor and Workforce Development (EOLWD) today announced that its Department of Unemployment Assistance (DUA) concluded audits on three businesses that uncovered $11,500,000 in unreported wages, 2,300 misclassified employees, and $2,554,000 in unpaid DUA obligations among the three unrelated businesses.  DUA, an agency member of the Joint Task Force on the Underground Economy and Employee Misclassification (JTF), credits the JTF with helping to bring the businesses into compliance. 

The JTF was established by Governor Deval Patrick through Executive Order #499 in March 2008 to coordinate multiple state agencies’ efforts to stamp out fraudulent employment activities by enforcing the state’s labor, licensing, and tax laws. The JTF includes, but is not limited to, the Attorney General’s Office, EOLWD’s Departments of Industrial Accidents, Labor Standards and Unemployment Assistance, and the state’s Department of Revenue. All of the participating agencies work together to protect workers, legitimate businesses and state revenues from the underground economy  Although the vast majority of Massachusetts employers conduct business consistent with the law, the JTF works to enforce the law and hold accountable those who do not.

“While the Joint Task Force continues to have great success in enforcing the law and inhibiting employee misclassification, there is still work to be done.  These audit results show that illegal business practices continue and cut across varied business sectors,” stated Joanne Goldstein, Secretary of the Executive Office of Labor and Workforce Development and chair of the Joint Task Force on the Underground Economy and Employee Misclassification. “It is gratifying that the state agency collaborations continue to effectively uncover activities that must be stopped so that all of the Commonwealth’s businesses share a level playing field, and workers are treated justly.”

DUA investigators determined that of the $11,500,000 in unreported wages, $3,064,700 was attributable to misclassified 1099 wages, $4,420,492 was attributable to unreported cash payments and $4,014,808 was attributable to unreported W-2 wages. Among the findings were:

  • An adult entertainment establishment that failed to report any wages for 619 workers and paid those workers in lump sum cash payments.  The same company misclassified an additional 12 workers as “independent contractors,” issuing them 1099 tax forms, when in fact those workers were employees who should have received W-2s.
  • An auto auction company that misclassified its entire workforce of over 1,400 employees, calling them “independent contractors” and issuing 1099s.  None of these workers met the test to be truly classified as independent contractors.
  • A home health care agency that misclassified 299 workers and failed to report $4.2M in taxable wages.

Once informed of their audit results, all three businesses responded immediately and engaged with DUA to achieve compliance, by properly classifying employees and making payments on the Unemployment Insurance tax debt they had incurred.

“The collective efforts of the Joint Task Force is what really made the difference in each of these employers coming into compliance,” said Michelle Amante, Acting Director of the Department of Unemployment Assistance.  “Once businesses realize that one state agency is sharing information with other state agencies, and that we are all committed to separate and joint enforcement actions, we often see businesses moving swiftly to come into compliance with the law, including unemployment insurance obligations.” 

The DUA cannot reveal the names of the companies by law as this statute ( MGL G. L. c. 151A, § 46), obligates the DUA to keep the company names confidential.  

Workers who believe that their rights have been violated and businesses who are aware of other businesses who do not comply with the law are strongly urged to call the  Joint Task Force Referral Line at (877) 965-2267  or the Attorney General’s Fair Labor Hotline at (617) 727-3465,  email tips to jtftips@state.ma.us, or visit the Joint Task Force website at www.mass.gov/lwd/eolwd/jtf/ to submit complaints.

###