Report Suspected Misclassified Workers

Wisconsin employers have an obligation under the unemployment, workers compensation, labor standards and civil rights laws to classify their workers correctly as either "employees" or "independent contractors".

• Employees are entitled to protections under the unemployment, worker's compensation, labor standards and civil rights laws.
• Independent contractors are not entitled to all of those same protections.

How to Report

The department relies on citizen involvement to report situations where workers may be misclassified.

Compliance

The department works to ensure that workers are properly classified as employees or independent contractors through compliance programs.

Department field auditors conduct routine periodic examinations of employer records. The specific audit objectives include investigating alleged independent contractor issues, determining compliance with unemployment insurance reporting requirements, and investigating suspected unemployment insurance benefit fraud.

The department also conducts worksite compliance investigations. The department is authorized by Wis. Stat. § 103.06, to conduct compliance investigations at construction worksites as defined in Wis. Stat. § 108.18 (2)(c) to determine if workers are being properly classified as employees or independent contractors and to determine if employers are providing workers compensation coverage for their employees.

Penalties

If an employer is found to be utilizing misclassified workers, the employer may be liable for additional tax, interest and penalties. If as a result of an investigation an employer is found to be utilizing misclassified workers, additional tax, interest and civil penalties, including the issuance of stop work orders, may result. In addition, an employer may be subject to criminal penalties for intentional misclassification.

Administrative Penalty for Intentional Misclassification:

Wis. Stat. § 108.221(1) provides that employers engaged in construction as described in Wis. Stat. § 108.18 (2)(c), or who are engaged in the painting or drywall finishing of buildings or other structures, who knowingly and intentionally provide false information to the department for the purpose of misclassifying or attempting to misclassify an employee, shall for each incident, be assessed a penalty by the department in the amount of $500 for each employee who is misclassified, not to exceed $7,500 per incident.

The department shall consider the following factors in determining whether an employer knowingly and intentionally provided false information to the department: (1) whether the employer was previously found to have misclassified an employee in the same or substantially similar position; and (2) whether the employer was the subject of litigation or a government investigation relating to worker misclassification and the employer, as a result of that litigation or investigation, received an opinion or decision from a federal or state court or agency that the subject position or a substantially similar position should be classified as an employee. The statute provides those factors are non-exclusive; therefore, the department may also consider other factors.

Criminal Penalty for Intentional Misclassification:

Under Wis. Stat. § 108.24 (2m), any employer engaged in construction as described in § 108.18 (2) (c) or engaged in the painting or drywall finishing of buildings or other structures who, after having previously been assessed an administrative penalty by the department under § 108.221 (1), knowingly and intentionally provides false information to the department for the purpose of misclassifying or attempting to misclassify an individual as a nonemployee shall be fined $1,000 for each employee who is misclassified, subject to a maximum fine of $25,000 for each violation.

The department may refer violations of this subsection for prosecution by the department of justice or the district attorney for the county in which the violation occurred.

Administrative Penalty for Coercion:

Under Wis. Stat. § 108.221 (2) (c), any employer described in § 108.18 (2) (c) or engaged in the painting or drywall finishing of buildings or other structures who, through coercion, requires an individual to adopt the status of a nonemployee shall be assessed a penalty by the department in the amount of $1,000 for each individual so coerced, but not to exceed $10,000 per calendar year.