Virginia Department of Labor and Industry Commissioner Establishes a Policy to Address Worker Misclassification

On June 2, 2015, the Commissioner of the Virginia Department of Labor and Industry issued a memorandum to the Virginia Occupational Safety and Health (“VOSH”) staff which established a policy to address the misclassification of employees in VOSH inspections and investigations. The goal of the policy is to “level the playing field” for employers who comply with applicable labor laws and help to assure that the construction bid process is fair for all participants.

By way of background, Virginia employers are required to provide employees with a safe and healthy work environment free from recognized hazards, comply with applicable occupational safety and health rules and regulations; provide employees with applicable notices and information; and report incidents to the Department of Labor and Industry. VOSH may issue citations and/or penalties to employers who violate the foregoing requirements. To support the issuance of such citations and/or penalties, VOSH inspects employers who allegedly engaged in prohibited conduct. It is during these inspections that VOSH encounters the issue of misclassification.

As set forth in the memorandum, the policy, which will take effect on July 1, 2015, provides:

Where VOSH has reasonable cause to believe that worker misclassification has occurred in a VOSH case, the following actions will normally be taken:

  • In the event that citations and penalties are proposed for the employer, penalty reductions for size and good faith will NOT be afforded to the employer.
  • In construction multi-employer worksite situations, each contractor (e.g., general contractors, prime subcontractors and lower tier subcontractors) will be asked to provide proof of their Department of Professional and Occupational Regulations (DPOR) contractor’s license AND for proof of the DPOR license of any of its subcontractors.
  • When it is determined that a construction employer has contracted with an unlicensed subcontractor, VOSH will make a written referral to DPOR for the contractor and its unlicensed subcontractor (DPOR sanctions for contracting with unlicensed subcontractors may include fines, probationary terms, suspension or license revocation).
  • In cases where the contract value for the specific subcontractor’s job is less than $1,000.00, VOSH will make a written referral to the Virginia Employment Commission (VEC) and/or the Virginia Workers’ Compensation Commission (VWCC) for potential audits of the employer’s employment practices. There may be instances where referrals will be made for contract values over $1,000.00 as well.

As a result of the foregoing policy, businesses that engage independent contractors in the construction industry or otherwise bid on construction jobs may face higher penalties and investigations by multiple government agencies (e.g., VOSH, VEC and VWCC).

According to the VOSH Field Operations Manual, the following factors are considered in determining whether a worker is an employee or independent contractor:

  • Who has responsibility to control the workers?
  • Does the alleged employer have the power to control the workers?
  • Who pays the worker’s wages?
  • Whom do the workers consider their employer?
  • Does the alleged employer have power to hire, fire, or modify the employment conditions of the workers?
  • Does the ability of the workers to increase their income depend on efficiency rather than on initiative, judgment or foresight?
  • How are the worker’s wages established?

The most important of the factors are the power and responsibility to control the workers.

If you have any questions or comments regarding the foregoing, please let us know.