Legislation currently being considered by the Wyoming Legislature’s Joint Corporations Committee entitled Misclassification of Employees – Penalties, saw spirited debate over the issue when the bill was discussed before the committee last month in Sheridan.

The legislation is aimed at fixing existing problems with employers misclassifying employees as independent contractors. While there are likely many errors in the classification of employees due to confusion over the issue, there are certainly those taking advantage of the lack of enforcement in Wyoming to avoid paying Worker’s Compensation, Unemployment insurance and other taxes.

“In Wyoming, the worst penalty most businesses will see is having to pay the Worker’s Comp and Unemployment Insurance they should have paid, this is a good system for honest employers who made a mistake, but it is easily scammed by others,” says WCC President Josh Carnahan.

No matter how often it is discovered that an employer misclassified employees, the penalty remains the same, pay the Worker’s Compensation and Unemployment Insurance that is due. Some employers may take the gamble hoping they will not get caught, and in Wyoming its a gamble that can not only pay off due to lack of enforcement, but can also have additional benefits.

“In the current tight construction market, the difference of honestly paying taxes or actively avoiding them can mean the difference between winning and losing a bid,” continued Carnahan.

The Joint Corporations Committee is also well aware that the misclassification of employees could quickly become an epidemic as regulations, and additional taxes, surrounding the Affordable Care Act, or “ObamaCare” go into effect.

The current legislation was proposed as a simple fix, however as proponents reviewed the legislation, the “simple fix” became a subject of serious debate. The issue stems from the State’s definition of “employee” which isn’t even addressed in the current bill. The current definition allows for a wide ranging gray area of who may be considered an employee, and who may not, with a lot of overlap, which is necessary to facilitate different industries and differing roles of employees.

“If this legislation is passed as it currently reads, an employer that is trying their best to classify, report and pay the proper taxes, could still find themselves in serious trouble with the state over a difference of opinion be-tween the employer and enforcement officers due to the complexity of employee definitions, the employer could even face jail time,” says Carnahan.

All parties agree there will need to be a major education component of any effort to reduce employee misclassifications, however education efforts should not be solely focused on employers. Carnahan says, “As we learned when the preference laws began being enforced, it is essential that the people who are doing the enforcement understand what it is they are enforcing, and the impact it has upon businesses.”
The employee misclassification bill will again be before the Joint Corporations Committee in October, and it is likely that the spirited debate over the issue will continue.

“WCC will continue working with all parties involved to find an equitable resolution to this issue, a resolution that does not lead to mountains of more paperwork and regulations for our already overburdened employers, and certainly nothing that could lead to massive fines or imprisonment of honest employers trying to do their best,” says Carnahan.