ON THE HUNT: Task force looking at ways to root out wage theft

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State agencies on Wednesday told a panel that the costs of wage theft — a persistent source of concern in the construction industry — have worsened in recent years, depriving the state of millions worth of tax revenue.

Members of a state misclassification task force have been meeting monthly since August to examine a range of abuses often lumped together as “worker misclassification” and are now charged with drawing up recommended remedies. Their final report is not due until early March. But that will not signal the end of the state’s search for improvements, said Caleb Frostman, secretary of the Wisconsin Department of Workforce Development, at a task-force meeting on Wednesday in Madison.

“The governor doesn’t see this task force as a one-and-done,” he said. “This is somewhat of an ongoing issue.”

During Wednesday’s meeting, state officials provided a series of responses to questions about the cost of misclassification, current attempts to root out violations and policies that could help Wisconsin better police employers. Various figures suggest misclassification has become only more prevalent in recent years.

According to the DWD, the state lost out on $56.3 million in taxes because of misclassification in 2018 and 2019. That was up greatly from the $16.6 million that such violations cost the state in 2000.

Small employers — those with fewer than 20 workers — are responsible for about 85% of the cases of misclassification, according to the DWD.

Among the enforcement actions the state can now take, some fear one could actually end up enabling offending contractors to side-step investigators. Wisconsin’s wage-theft law gives state officials authority to issue stop-work orders when looking into allegation of wage theft and similar violations. But before a job site can be shut down, investigators must first provide contractors with 24-hours advance warning. That in effect gives  companies time to cover up abuses before they can be caught. State officials have in fact never issued a stop-work order in a wage-theft investigation.

Despite the state’s efforts to crack down on misclassification, employers who are caught breaking the rules still often see the penalties they have to pay as a cost of doing business. Those are capped at $7,500 per instance of misclassification in civil cases. If criminal charges are involved, the limit rises to $25,000. Yet the state has never hit a contractor with criminal charges alleging misclassificaiton.

Janell Knutson, director of legal affairs for the DWD’s unemployment insurance division, noted that the criminal penalties have only been on the books since 2016.

“In legal land,,” she said, “that’s not a long time.” Follow @natebeck9