Underreporting Payroll and Misclassifying Employees Now Felonies

April 17, 2007

A key provision of the new workers’ compensation reform law toughening the penalties for employers who cheat on information used to calculate premiums is now in effect.

Employers who intentionally understate or conceal payroll or misrepresent the duties of employees to avoid proper classification are deemed to have not secured workers’ compensation coverage and are therefore subject to the same penalties as a business that does not have workers’ compensation coverage for its workers.

For employers with more than five employees, the crimes of concealment or misrepresentation are now class E felonies with fines ranging from $5,000 to $50,000.

For smaller employers, the first violation remains a misdemeanor carrying fines of $1,000 to $5,000. Second offenses are felonies regardless of the number of employees.

Under the new law, employers without coverage or who fail to pay penalties are considered a serious danger to public health and safety and the Workers’ Compensation Board is authorized to issue immediate stop-work orders.

The law also bars companies from all public works projects if found guilty of a misdemeanor for one year. In the case of a felony conviction, offenders are barred for five years.