On February 1, 2008, the Governor of the State of Michigan, Jennifer M. Granholm, issued Executive Order No. 2008-1 (the “Order’), which authorized the creation of an interagency task force to examine and evaluate existing employee misclassification enforcement mechanisms in Michigan and other jurisdictions, and make recommendations for more effective enforcement mechanisms.
According to the Order, employers in Michigan and elsewhere often misclassify individuals that they hire as independent contractors resulting in the potential violation of a number of legal obligations under state and federal labor, employment and tax laws. Additionally, the Order notes that employee misclassification places law abiding employers at a competitive disadvantage and significantly harms Michigan taxpayers because employers that misclassify workers as independent contractors illegally avoid their financial obligations to the State of Michigan. The Task Force will include the Director of the Department of Labor and Economic Growth or his or her designee, and an individual member appointed by the Governor from the Wage and Hour Division, Workers Compensation Agency, Unemployment Agency, and the Discovery and Tax Enforcement Division of the Department of Treasury. Initial members will serve various staggered terms. After, the initial appointments, members will be appointed for four-year terms.
The Task Force is charged with specific tasks, to include (1) creating a system of sharing information relating to misclassification violations with other Task Force members, (2) exploring information sharing possibilities with investigators in other jurisdictions, (3) identifying barriers to information sharing under state law and recommending executive or legislative actions necessary to overcome these barriers (4) developing strategies to systematically investigate misclassification in industries where misclassification is most common, (5) identifying significant cases of misclassification that should be worked jointly, and (6) working cooperatively with local, state, and federal law enforcement agencies, including the sharing of information with the Internal Revenue Service, and establishing a systematic procedure for referring cases to the Attorney General or local or federal prosecutors. On July 1st of each year, the Task Force is required to report to the Governor its accomplishments, identify any administrative of legal barriers impeding its effective operation, and make recommendations for executive or legislative measures to improve misclassification enforcement.
According to Frank Del Barto, a member of the Firm’s Employment and Labor Group, the action taken by Michigan’s governor is yet another example of the more stringent enforcement by state and federal agencies of the overtime and tax laws. Once again, we recommend that employers review their agreements with independent contractors to confirm that they are properly classified.