Under the leadership of Executive Director Ava DeJoie, the Louisiana Workforce Commission (LWC) has taken proactive steps to mitigate employer fraud since her appointment in January of 2016. Although workers’ compensation fraud is often thought of as a problem among injured workers receiving undue benefits, there are other underlying issues at play in the employer sphere.
During the Workers’ Compensation Advisory Council (WCAC) meeting in January of 2017, Office of Workers’ Compensation Administration (OWCA) Director Sheral Kellar, announced the LWC’s fraud unit will further consolidate its resources between the OWCA and the Unemployment Insurance (UI) department.
Louisiana Comp Blog spoke to OWCA Director Sheral Kellar, and Director of the Office of Unemployment Insurance Administration Renita Ward Williams, about the ongoing consolidation efforts and more.
And don’t forget to register for Comp Blog’s next Comp in Focus luncheon at Antoine’s in New Orleans on April 11th. LWC attorney Darrick Lee will discuss employer fraud investigation and prosecution and how the agency is working to improve.
Comp Blog: What were the reasons for consolidating the fraud department?
Kellar: It was a combination of factors. We had three recent resignations, and Kaye Fournet, who previously led the fraud unit [for OWCA] retired. This provided an opportunity for us to restructure the fraud unit and team up with Renita Williams and the Office of Unemployment Insurance.
Comp Blog: Misclassification and payroll fraud is notoriously difficult to prosecute. How much of this new emphasis on employer fraud is coming from Governor John Bel Edwards?
Kellar: After the devastating floods that occurred in August 2016 and other recent disasters, we’ve seen 800 new “contractors” register themselves as business entities. When new businesses crop up, especially after a disaster, they don’t play by the rules. This gives a competitive advantage to these “businesses,” [because they do not pay taxes on misclassified employees] and endangers the workers they employ. Governor Edwards certainly wants to focus on employer fraud and we thought here at the Office that with the vacancies in the fraud section, this would be good opportunity.
Comp Blog: How is the OWCA/UI fraud unit currently structured?
Kellar: The unemployment fraud section has 25 investigators and the OWCA has four. In addition to the OWCA office having a manager and supervisor, all of the investigators work together to perform employer audits.
Comp Blog: In addition to the planned increase of employer fraud enforcement by restructuring efforts, are there any legislative priorities for the upcoming regular session to help bolster these efforts?
Williams: It’s a high priority for us to amend Title 23 Section 1711 that would increase the penalty amounts for employers that misclassify their employees to gain a competitive advantage.
As the statute is currently written, we are required to give these employers a warning before issuing an administrative fine. In some cases, especially with the construction industry, employers attempt to circumvent the warning by closing down that particular business only to open another under a different name. We think we’ll be able to get a bill introduced to address this issue for the 2018 Regular Session.
Comp Blog: How effective has the fraud unit been, and what are your goals for the future?
Kellar: In 2016, the fraud unit investigated 790 allegations of fraud, with 20 having been referred to the Attorney General’s Office. Successful criminal prosecutions resulted in restitution of $1,233,875 from nine employers and $391,018 from 11 employees.
Williams: In 2015, audits of 1,068 companies by UI identified approximately 19,956 people misclassified as independent contractors rather than as employees. The agency billed $1,496,778 in unemployment insurance taxes that employers owed based on the underreporting of $100,818,591 in taxable wages.
With improved efficiencies in the use of current staff and other resources, we expect an increase in the number of audits performed, which will result in the identification of more employers who misclassify workers and tax them accordingly. Under federal law, states are required to audit one percent of all contributing employers in their respective state. We are proud to report that Louisiana is one of only two or three states that meet this requirement.
Kellar: With the new restructured fraud unit, our goal is to increase UI audits by 0.3 percent for a total 1.3 percent audit rate statewide. Based on what UI collected at one percent, the additional 0.3 percent could generate an additional $1.5 million.