A bill recently introduced in the Louisiana House of Representatives would increase penalties for worker misclassification to extreme levels. As a result, the bill – H.B. 665 – would make it more risky for companies to do business with independent contractors.
H.B. 665 would amend the Louisiana unemployment compensation law by increasing the penalties the Unemployment Administrator may assess against a company for misclassifying a worker as an independent contractor. These penalties would be in addition to any contributions, interest, and penalties otherwise due.
Current law permits administrative penalties to be assessed as follows:
- An administrative penalty is not permitted for the first instance of worker misclassification – so long as it was not made knowingly;
- A penalty not to exceed $250 per misclassified worker for a second instance;
- A penalty not to exceed $500 per misclassified worker for a third instance; and
- A penalty of not less than $100 nor more than $1,000 per misclassified worker, or imprisonment for not less than 30 days nor more than 90 days, or both for a fourth or subsequent instance.
The amendments proposed by H.B. 665 would permit administrative penalties to be assessed in the following manner:
- A penalty not to exceed $5,000 per misclassified worker for the first instance of worker misclassification – regardless of whether it was made knowingly;
- A penalty not to exceed $10,000 per misclassified worker for a second instance;
- A penalty not to exceed $25,000 per misclassified worker for a third instance;
- A penalty not to exceed $50,000 per misclassified worker, or imprisonment for not less than 90 days, or both for a fourth or subsequent instance.
The Unemployment Administrator would have discretion in determining the amount of an administrative penalty and is required to consider factors including previous violations by the company, the seriousness of the violation, the good faith of the company, and the size of the company’s business.
If enacted, H.B. 665 would make it more risky for companies to engage independent contractors. As a consequence, companies may decide to hire additional employees instead of working with an independent contractor in order to avoid the risk of worker misclassification and associated crippling penalties. In effect, H.B. 665 would likely make it more difficult for independent contractors to exercise their right to be self-employed.
It is important that legislators in Louisiana, and around the country, receive all the facts about independent contractors before making decisions that could threaten this vital sector of the economy. For more information on how to become involved in the Coalition to Promote Independent Entrepreneurs’ effort to get the facts out and protect the right to self-employment, contact us today at info@iecoalition.org.
