LANSING, MI -- Michigan Attorney general Dana Nessle is creating a new unit to recover $107 million in tax revenue lost each year from businesses illegally misclassifying workers or paying them off the books.
At a Monday press conference, Nessel announced the creation of a task force to aggressively investigate new complaints of payroll fraud. Senate Minority Leader Jim Ananiach, D-Flint, said Democrats are bolstering the effort with a package of bills aimed at increasing civil and criminal penalties for payroll theft, strengthening protections for whistleblowers and auditing companies that commit violations.
“Companies that cheat and steal are committing crimes, plain and simple,” Nessel said. “We must hold them accountable.”
Nessel’s office said wage theft is most common in industries such as construction, landscaping, janitorial services and child care. “Shady” businesses have been getting away with it for too long, she said.
Cases of workplace, payroll and tax violations tripled across the country in the last few years, Nessel said. The new payroll fraud enforcement unit will gather credible complaints from whistle blowers and investigate claims with the assistance of other departments and agencies, she said.
Michigan House Minority Leader Christine Greig, D-Farmington Hills, said companies have been “robbing Michigan for years in broad daylight.”
Workers lost out on an estimated $429 million in wages and overtime pay between 2013 and 2015, according to an analysis by the Economic Policy Institute. Companies pay workers under the table or as independent contractors to avoid payroll taxes, workers’ compensation and unemployment insurance costs.
Independent contractors like Joe Meyer, 29, have been left with the burden of paying medical bills from injuries suffered on the job. The Jackson man couldn’t afford to receive emergency care after cutting himself to the bone, leaving him with nerve damage in his hands.
Many independent contractors also aren’t aware that they have to cover their own contributions to Social Security and Medicare, according to Steve Wettle, a retired Social Security worker.
Getting rid of “cheaters” makes the business environment better for workers and employers, Nessel said. Legitimate businesses have a hard time competing for bids with companies that can offer cheaper services while underpaying employees, she said.
Payroll fraud can be a sophisticated operation, Nessel said, involving many actors and “layers of deception.” Companies often involve labor brokers, subcontractors, shell companies and check-cashing businesses to defraud workers, Nessel said.
Nessel said she is disappointed no Republican legislators accepted her invitation to the press conference.
“They should care just as deeply about his issue as the Democrats in this room," Nessel said.
Ananich said he is hopeful Republicans see the importance of the bill package. He said the legislation will crack down on crime and recover lost tax revenue.
“This is a way to make sure people are paid what they are owed,” Ananich said. “To me it should not be a partisan issue.”
Nessel was unable to name any business organizations supporting the new task force and legislation.
Ananich said he will work to gain the support of the Michigan Chamber of Commerce and Small Business Association of Michigan. He said the only groups that could be opposed to effort “are people that are shady."
“There are organizations that base their business model on cheating,” Ananich said. "If you believe that’s OK you’re going to be on the other side of this issue ... It’s hard to believe anyone could be on the other side of it.”