Feds halt Louisiana program that waives back taxes for employers with misclassified workers
13th December 2021 · 0 Comments
By Wes Muller
Contributing Writer
(lailluminator.com) — A new law passed this year that would have waived unemployment taxes and penalties for employers who misclassify their workers as independent contractors will not take effect in January as scheduled because parts of the statute violate federal labor laws, according to the Louisiana Department of Revenue and Louisiana Workforce Commission.
The law had been pushed by the state’s biggest and most powerful business group, the Louisiana Association of Business and Industry.
In a bulletin issued on December 1, the Louisiana Department of Revenue stated it was delaying implementation of certain provisions of the Fresh Start Program that lawmakers passed and Gov. John Bel Edwards signed into law during the 2021 Regular Session.
The Louisiana Workforce Commission has likewise halted parts of the law after the U.S. Department of Labor found the provisions were “not permissible under federal unemployment compensation (UC) law,” according to an emergency declaration issued by the Workforce Commission.
The Fresh Start Program is scheduled to take effect Jan. 1, 2022, but it will do so without key provisions that lawmakers designed for businesses that have characterized their regular employees as independent contractors — and failed to pay the employee taxes that are required.
Under the program, the state would have waived any prior unemployment taxes and interest for certain employers who agreed to properly reclassify their workers as regular employees.
Worker misclassification is a problem in Louisiana, particularly in the construction industry, and often deprives employees of basic labor rights and protections for workplace injuries, fair wages, family leave and unemployment insurance. It has also put a strain on Louisiana’s unemployment trust fund and has cost the state an estimated $9 million in income tax revenue, according to the Louisiana Legislative Auditor.
Compared to other states, Louisiana’s laws have been lax on enforcement to address the problem. First-time offenders can receive a $500 fine, but that penalty can be waived if the employer correctly reclassifies the worker within 60 days notice.
Sponsored by Sen. Jay Luneau (D-Alexandria), the legislation that created the Fresh Start Program was championed by business lobbyists and lawmakers as an alternative to heavy-handed enforcement in the hope that it would provide a path for employers who wanted to become legitimate tax payers but have avoided doing so because they would owe large amounts in back taxes.
However, the Labor Department told state officials that they cannot waive back taxes on unemployment insurance because it would violate the Federal Unemployment Tax Act and the State Unemployment Tax Act.
“Waiving employer liability for back UI taxes is not permissible under federal unemployment compensation (UC) law and regulations,” the Louisiana Workforce Commission notice stated.
Luneau could not be reached for comment as of presstime.
The delay will last until the legislation can be amended in the 2022 Regular Session.
This article originally published in the December 13, 2021 print edition of The Louisiana Weekly newspaper.
