Preparing for the Imminent Crackdown on Payroll and Employment Practices

Federal and State Law impose a vast framework of laws and rules governing employer obligations and employee rights, creating a spider-web ripe for mistakes, abuse and litigation. On Monday 4/22/2019, Michigan’s new Attorney General Dana Nessel announced her intention to crack down on abuse and theft associated with misclassifying workers to avoid paying full wages, overtime and taxes. Although the Attorney General’s announcement highlighted the use of employers’ use of labor brokers and subcontractors, shell companies and check-cashing businesses to avoid paying workers full wages, overtime and benefits, while dodging federal, state and local taxes, a broader crackdown is likely. The Attorney General is likely to focus her inquiries on sometimes minute distinctions between employee/independent contractor, exempt/ non-exempt employee, work/non-work time. The legislature is preparing to move legislation that will increase associated civil and criminal penalties, strengthen whistleblower protection, audit violators and require employee backpay. Every employer should carefully consider whether its payroll practices and employee classifications will survive scrutiny under a magnifying lens, and whether any risks are cost justified. Get ahead of this potential problem, before it gets ahead of you!