(WXYZ) — Michigan Attorney General Dana Nessel and state legislators are cracking down on companies that misclassify workers to avoid paying full wages, overtime and taxes.
According to a Michigan State University study, payroll fraud robs those workers and Michigan taxpayers of hundreds of millions of dollars in lost wages, benefits and tax revenues every year.
“Payroll fraud affects all of us, especially the families who are robbed. When shady businesses exploit people by cheating them of the wages they are owed, families have less money in their pockets, zero benefits, and an uncertain future,” Nessel said in a release. “No family should live in poverty because greedy businesses cheat the system and refuse to play by the rules. This has gone on for far too long and Michigan isn’t going to wait any longer to crack down on these crimes.”
The Payroll Fraud Enforcement Unit will dedicate resources to receive credible complaints of payroll fraud and misclassification.
“Without enforcement and regulations that have real teeth, bad actors will continue to break the law, steal from their workers and shortchange Michigan taxpayers,” Nessel said. “The proposals we are announcing today will give us the tools we need to crack down on the businesses that cheat the system and send a clear signal that Michigan puts our families first, not businesses that break the rules. In Michigan, we believe in supporting good companies that pay workers what they’re owed, and we need laws that reflect this.”
Michigan taxpayers are shortchanged $107 million a year in revenue through tax fraud when businesses misclassify workers, by reporting employees as self-employed independent contractors or paying them off the books as a way to avoid paying taxes, the MSU study found.
According to a release, companies that cheat the system use crooked labor brokers and subcontractors, shell companies and check-cashing business to avoid paying workers full wages, overtime and benefits, while dodging federal, state and local taxes.
Wage theft rates vary by industry but are highest in construction, landscaping and janitorial services as well as childcare, beauty and personal services, retail, food service, car wash and home health care.