Gov. M. Jodi Rell signed into law today a bill that increases the fine for employers who illegally lower their costs by misclassifying employees as independent contractors.
The bill was sought by Attorney General Richard Blumenthal and the Chief State’s Attorney’s Office to go after employers who misclassify employees to avoid paying contributions for unemployment compensation and workers’ compensation.
When introducing the proposal in March, Blumenthal said, “This is cheating, plain and simple.”
Blumenthal said the fact that Linda McMahon’s World Wrestling Entertainment hires independent contractors as wrestlers had nothing to do with his timing or push for increased fines.
“There is nothing political about our announcement,” he said, a Democratic U.S. Senate candidate who eventually could face McMahon, the current leader among three Republicans in the race.
The current fine for misclassification was $300 per incident. The fine now is $300 a day per violation.
More than 300 stop-work orders have been issued for employer misclassification, according to the Enforcement Commission on Employee Misclassification. For the 1,200 workers misclassified, the Department of Labor collected $90,000 in civil penalties.
Blumenthal said the problem is costing the state millions every year from the state having to pick up the medical and workers compensation costs for employees deemed independent contractors.
Department of Revenue Services BETA Unit audits related to worker misclassification assessed $1,222,869 in additional tax. For the current fiscal year, there have been 39 worker misclassification audits completed, resulting in additional tax of $780,219.
In the construction business, companies that misclassify workers are able to underbid legitimate contractors, said Don Shubert of the Connecticut Construction Industry Association.