Misclassification group finds GC liability for subcontractor abuses ‘not feasible’

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A state task force on misclassification has found it’s not feasible to hold general contractors accountable for wage and hour violations committed by their subcontractors.

The Department of Workforce Development’s Task Force on Payroll Fraud and Misclassification met last week to consider policy recommendations to help the state crack down on wage and benefit abuses thought to be widespread in the industry. During its meeting on Thursday, the group recommended that Wisconsin require foreign and domestic LLCs to disclose their members and managers, called for changing state law to penalize companies that file false information with the state and recommended that the state’s Department of Financial Institutions refer violations to the state Department of Justice.

But the group separately concluded that a separate proposal to hold general contractors accountable for the misdeeds of their subcontractors wasn’t feasible. And it decided against adopting a statewide standard that could be used to decide if workers are independent contractors rather than direct employees.

The task force’s recommendations may become part of an annual report delivered to Gov. Tony Evers each spring. Evers earlier this year included policy proposals from the group’s 2020 report in his biennial budget request. The proposals, however, didn’t pass muster with Legislative Republicans, who tossed many of Evers’ budget recommendations.

The task force had previously proposed taking various steps to combat misclassification and wage theft, including strengthening the state’s investigative powers, reinstating a contractor-registration system that had been in place until 2013 and adding to the sorts of penalties that can be imposed on contractors found guilty of such abuses.

The group, in its meeting last week, suggested the state require foreign and domestic LLCs that register themselves with the state also disclose whom they are owned and operated by. State law now only requires companies to disclose their registered agents, with whom they may or may not be affiliated. Twenty-five other states require LLCs to identify their top officials.

Likewise, the task force recommended Wisconsin change state law to make it a felony to file false LLC information. State statute now has no prohibition on false filings. The task force also said the DFI should be able to refer violations to the state attorney general.

Rather than adopt a so-called upstream-liability requirement to hold general contractors responsible when subcontractors skirt wage and hour laws, the task force recommended state agencies continue to investigate such violations and refer offenders to the state department of justice. And rather than adopt a test to determine if workers are truly independent contractors, the task force called for devising a questionnaire that state agencies could turn for guidance in such matters. Follow @natebeck9