Wisconsin looks to crack down on payroll fraud and “level the playing field”

In April, Wisconsin Governor Tony Evers established a new enforcement unit to prevent companies from incorrectly classifying their workers as independent contractors and compensating them “under the table,” dodging payroll taxes, workers’ compensation and unemployment insurance costs.

“When employees are falsely classified or treated unfairly, it hurts our families, our communities, and our whole state,” said Governor Evers. “The new Joint Enforcement Task Force will make sure everyone who puts in an honest day’s work gets the compensation and benefits they’ve earned.”

Pete Feaman, vice-president at IPS, says this effort by the state should help level the playing field. He often hears from business owners about how tough it is to compete in a bidding situation when someone is falsely identifying employees as 1099 contractors.

“As an employer, you do not have to pay payroll taxes such as Social Security, Medicare, and unemployment on any 1099 contractors that work for you,” says Feaman. “Those taxes are the responsibility of the 1099 contractor, so those who can ‘avoid’ these taxes are able to submit lower bids.”

Feaman hopes the enforcement unit will create more awareness and clarity for worker classification. Many employers he talks to simply don’t know who classifies as a 1099 contractor.

“The state provides a two-part test to help employers make this determination, but many of the companies don’t know this resource exists. Every employment situation is unique and the more tools provided to help employers clarify these relationships is a good thing.”

Some experts believe this deception by those who cheat the system has produced a business climate that is one-sided and does little to benefit employers following the law.

“I hope the task force will help honest businesses clear up what is sometimes a gray area for them and guide them to make the right decisions,” says Feaman, “while also keeping businesses in line that are knowingly misrepresenting employees.”

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