AB462: Bill Text

Unemployment insurance; worker misclassification penalties

Current law requires DWD to assess an administrative penalty against an employer engaged in construction projects or in the painting or drywall finishing of buildings or other structures who knowingly and intentionally provides false information to DWD for the purpose of misclassifying or attempting to misclassify an individual who is an employee of the employer as a nonemployee under the unemployment insurance law. The penalty under current law is $500 for each employee who is misclassified, not to exceed $7,500 per incident. Current law additionally requires DWD to assess an administrative penalty against such an employer who, through coercion, requires an individual to adopt the status of a nonemployee in the amount of $1,000 for each individual so coerced, but not to exceed $10,000 per calendar year. Penalties are deposited in the unemployment program integrity fund.

The bill removes the $7,500 and $10,000 limitations on these penalties and provides that the penalties double for each act occurring after the date of the first determination of a violation. The bill also removes the limitations on the types of employers that the penalties apply to, allowing them to be assessed against any type of employer that violates the above prohibitions.

Worker’s compensation; penalties for uninsured employers

Under current law, DWD is required to assess an administrative penalty against an employer who requires an employee to pay for any part of worker’s compensation insurance or who fails to provide mandatory worker’s compensation insurance coverage. If the employer violates those requirements, for the first 10 days, the penalty under current law is not less than $100 and not more than $1,000 for such a violation. If the employer violates those requirements for more than 10 days, the penalty under current law is not less than $10 and not more than $100 for each day of such a violation.

The bill provides that the penalty for violations occurring after the second such violation is $3,000 per violation, or three times the amount of the insurance premium that would have been payable, whichever is greater. The bill also provides that the penalty for violations occurring after the third such violation is $4,000 per violation, or four times the amount of the insurance premium that would have been payable, whichever is greater.

Also under current law, if an employer who is required to provide worker’s compensation insurance coverage provides false information about the coverage to his or her employees or contractors who request information about the coverage, or fails to notify a person who contracts with the employer that the coverage has been canceled in relation to the contract, DWD is required to assess a penalty of not less than $100 and not more than $1,000 for each such violation.

The bill provides that the penalty for violations occurring after the third such violation is $3,000 per violation, and the penalty is $4,000 for violations occurring after the fourth such violation.

Worker’s compensation; false or fraudulent claims

Under current law, if an insurer or self-insured employer has evidence that a worker’s compensation claim is false or fraudulent, the insurer or self-insured employer must generally report the claim to DWD. If, based on the investigation, DWD has a reasonable basis to believe that criminal insurance fraud has occurred, DWD must refer the matter to the district attorney for prosecution. Also under current law, DWD may request assistance from the Department of Justice to investigate false or fraudulent activity related to a worker’s compensation claim. If, based on that investigation, DWD has a reasonable basis to believe that theft, forgery, fraud, or any other criminal violation has occurred, DWD must refer the matter to the district attorney or DOJ for prosecution. The bill extends these requirements to insurers who have evidence that an application for worker’s compensation insurance coverage is fraudulent or that an employer has committed fraud by misclassifying employees to lower the employer’s worker’s compensation insurance premiums.

Worker misclassification outreach

The bill requires the Department of Administration to direct state agencies, constitutional offices, departments, independent agencies, and societies, associations, and certain other agencies of state government for which appropriations are made by law, to provide educational outreach regarding worker misclassification to employers, workers, and organizations that serve vulnerable populations.

Worker misclassification information

The bill requires the Department of Financial Institutions to provide informational materials and resources on worker misclassification to each person who files with DFI documents forming a business corporation, nonstock corporation, limited liability company, limited liability partnership, or limited partnership.

Construction contractor registration

The bill requires most persons who hold themselves out or act as construction contractors to be registered by the Department of Safety and Professional Services. DSPS may directly assess a forfeiture by issuing an order against any person who fails to register as required under the bill. The registration requirement does not apply to a person who engages in construction on his or her own property, to a state agency or local governmental unit, or to a person who engages in construction in the course of his or her employment by a state agency or local governmental unit.

Construction industry violations

The bill authorizes the secretary of revenue to provide monetary awards to individuals who provide information to the Department of Revenue regarding alleged state tax law violations by construction industry employers. The amount of the award is at least 15 percent, but not more than 30 percent, of the proceeds collected by DOR resulting from an administrative or judicial action concerning the allegations or from any settlement of such action.

The bill allows the secretary to reduce the amount of the award if the secretary determines that the information provided by the individual resulted from an administrative or judicial hearing; from a government report, hearing, audit, or investigation; or from the news media. However, the secretary may not provide an award to an individual who is convicted of criminal conduct arising from the individual's role in the alleged violation. In addition, an individual who obtains information regarding an alleged state tax law violation through the individual's official duties as a DOR or DOJ employee is not eligible to receive an award.

Under the bill, no employer may discharge or otherwise discipline or discriminate against any employee who provides information about alleged state tax law violations by a construction industry employer to DOR or the secretary.

Audits and investigations

The bill requires the Unemployment Insurance Division in DWD to coordinate with the Division of Personnel Management in DOA to review all recruitment and onboarding programs to ensure that auditor positions are correctly classified and the compensation for auditors is comparable to that in the private labor market. The bill also requires DWD to review resources available to investigators and auditors and evaluate potential strategies and improvements that could be implemented by DWD. The bill also requires DWD to submit a report to the legislature of its findings no later than January 31, 2027.

Finally, the bill authorizes three full-time positions for DWD to perform investigations and audits regarding worker misclassification.

Because this bill creates a new crime or revises a penalty for an existing crime, the Joint Review Committee on Criminal Penalties may be requested to prepare a report.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB462,1 Section 1. 16.40 (24) of the statutes is created to read:

AB462,2,9 16.40 (24) Worker misclassification outreach. Direct all departments to provide targeted educational outreach regarding worker misclassification in English, Spanish, and other languages spoken by a significant number of individuals in this state, to employers, workers, and organizations that serve vulnerable populations, including individuals with limited English proficiency. The outreach shall emphasize the appropriate departments to contact and the rights of individuals to remain anonymous when reporting worker misclassification.

AB462,2 Section 2. 71.738 (1b) of the statutes is created to read:

AB462,2,15 71.738 (1b) “Construction industry employer” means an employer engaging in any activity related to the erection, construction, alteration, demolition, repair, or maintenance of buildings, structures, bridges, highways, roadways, dams, tunnels, sewers, underground buildings or structures, pipelines or ducts, or any other similar construction projects or facilities.

AB462,3 Section 3. 71.738 (3h) of the statutes is created to read:

AB462,2,17 71.738 (3h) “Proceeds” means taxes, fees, penalties, and interest.

AB462,4 Section 4. 71.738 (3m) of the statutes is created to read:

AB462,3,2 71.738 (3m) “Secretary” means the secretary of revenue.

AB462,5 Section 5. 71.815 of the statutes is created to read:

AB462,3,14 71.815 Construction industry whistleblowers. (1) Legal actions and awards. (a) If the department commences or is a party to an administrative or judicial action against a construction industry employer for an alleged violation of this chapter and the secretary determines that the action is based on specific and credible information brought to the secretary by an individual, the secretary shall provide that individual an award of at least 15 percent, but not more than 30 percent, of the proceeds collected by the department as a result of the action or from any settlement in response to that action, except as provided in par. (b) and sub. (2). The secretary shall determine the amount of an award under this subsection based on the extent to which the information submitted by the individual contributed to the outcome of the administrative or judicial action or related settlement.

AB462,3,21 (b) If the secretary determines that an administrative or judicial action against a construction industry employer for an alleged violation of this chapter is based principally on an individual's disclosure of an allegation resulting from an administrative or judicial hearing; from a government report, hearing, audit, or investigation; or from the news media, the secretary may provide the individual an award not to exceed 10 percent of the proceeds collected by the department as a result of the action or from any settlement in response to that action.

AB462,4,2 (2) Ineligible claims. (a) 1. If the secretary determines that the claim for an award under sub. (1) is brought by an individual who planned or initiated the actions or omissions that led to the alleged violation resulting in the administrative or judicial action in which that individual is a party, the secretary may reduce the amount of the award by an amount that the secretary considers appropriate.

AB462,4,7 2. If the individual described under subd. 1. is convicted of criminal conduct arising from the individual's role in the alleged violation, the secretary may not provide an award to that individual. If the individual is convicted of criminal conduct arising from the individual's role in the violation after receiving an award, the secretary shall recapture the full amount of the award.

AB462,4,11 (b) 1. An individual who obtains information regarding an alleged violation of this chapter through the individual's official duties as an employee of the department or the department of justice is not eligible to receive an award under this section.

AB462,4,14 2. An individual who obtains information regarding an alleged violation of this chapter from an individual described under subd. 1. is not eligible to receive an award under this section.

AB462,4,17 (3) Administration. (a) No employer may discharge or otherwise discipline or discriminate against any employee who provides information described under this section to the department or secretary.

AB462,4,18 (b) The department shall promulgate rules to administer this section.

AB462,6 Section 6. 101.147 of the statutes is created to read:

AB462,4,23 101.147 Construction contractor registration. (1) (a) Except as provided in par. (b), no person may hold himself or herself out or act as a construction contractor unless that person is registered as a construction contractor by the department.

AB462,5,2 (b) The registration requirement under par. (a) does not apply to any of the following:

AB462,5,4 1. A person who engages in construction on property owned or leased by that person.

AB462,5,5 2. A state agency or local governmental unit.

AB462,5,7 3. A person who engages in construction in the course of his or her employment by a state agency or local governmental unit.

AB462,5,9 (2) An application for a registration under this section shall require the applicant to submit all of the following:

AB462,5,11 (a) The applicant’s name, contact information, and physical address for the business principal.

AB462,5,16 (b) If the applicant is a corporation, limited liability company, limited partnership, or limited liability partnership and is not organized under ch. 178, 179, 180, 181, or 183, evidence that the applicant is registered, or has obtained a certificate of authority or registration, to transact business in this state under s. 178.1003, 179.1002, 180.1503, 181.1503, or 183.0909, as applicable.

AB462,5,17 (c) Evidence of compliance with the requirements under ss. 108.17 to 108.205.

AB462,5,18 (d) Evidence of compliance with s. 102.28 (2).

AB462,5,21 (e) An acknowledgment of worker classification laws and penalties to ensure that construction contractors registered under this section are aware of their obligations.

AB462,5,23 (3) The department may directly assess a forfeiture by issuing an order against any person who violates this section.

AB462,6,2 (4) The department shall, with the advice of the department of workforce development, promulgate rules to administer and enforce this section.

AB462,7 Section 7. 101.1472 of the statutes is repealed.

AB462,8 Section 8. 101.19 (1g) (m) of the statutes is created to read:

AB462,6,5 101.19 (1g) (m) Registering construction contractors under s. 101.147.

AB462,9 Section 9. 102.125 (1m) of the statutes is created to read:

AB462,6,16 102.125 (1m) Application and premium fraud. If an insurer has evidence that an application for worker’s compensation insurance coverage is fraudulent or that an employer has committed fraud by misclassifying employees to lower the employer’s worker’s compensation insurance premiums in violation of s. 943.395, the insurer shall report the claim to the department. The department may require an insurer to investigate an allegedly fraudulent application or alleged fraud by misclassification of employees and may provide the insurer with any records of the department relating to that alleged fraud. An insurer that investigates alleged fraud under this subsection shall report the results of that investigation to the department.

AB462,10 Section 10. 102.125 (2) of the statutes is amended to read:

AB462,6,23 102.125 (2) Assistance by department of justice. The department of workforce development may request the department of justice to assist the department of workforce development in an investigation under sub. (1) or (1m) or in the investigation of any other suspected fraudulent activity on the part of an employer, employee, insurer, health care provider, or other person related to worker’s compensation.

AB462,11 Section 11. 102.125 (3) of the statutes is amended to read:

AB462,7,7 102.125 (3) Prosecution. If based on an investigation under sub. (1), (1m), or (2) the department has a reasonable basis to believe that a violation of s. 943.20, 943.38, 943.39, 943.392, 943.395, 943.40, or any other criminal law has occurred, the department shall refer the results of the investigation to the department of justice or to the district attorney of the county in which the alleged violation occurred for prosecution.

AB462,12 Section 12. 102.85 (1) (a) of the statutes is amended to read:

AB462,7,12 102.85 (1) (a) An For each act occurring before the date of the first determination of a violation of this subsection, an employer who fails to comply with s. 102.16 (3) or 102.28 (2) for less than 11 days shall forfeit not less than $100 nor and not more than $1,000.

AB462,13 Section 13. 102.85 (1) (b) of the statutes is amended to read:

AB462,7,18 102.85 (1) (b) An For each act occurring after the date of the first or 2nd determination of a violation of this subsection, an employer who fails to comply with s. 102.16 (3) or 102.28 (2) for more than 10 days shall forfeit not less than $10 nor and not more than $100 for each day on which the employer fails to comply with s. 102.16 (3) or 102.28 (2).

AB462,14 Section 14. 102.85 (1) (c) of the statutes is created to read:

AB462,7,23 102.85 (1) (c) For each act occurring after the date of the 3rd determination of a violation of this subsection, the employer shall be assessed a penalty in the amount of $3,000 for each act, or 3 times the amount of the premium that would have been payable, whichever is greater.

AB462,15 Section 15. 102.85 (1) (d) of the statutes is created to read:

AB462,8,5 102.85 (1) (d) For each act occurring after the date of the 4th determination of a violation of this subsection, the employer shall be assessed a penalty in the amount of $4,000 for each act, or 4 times the amount of the premium that would have been payable, whichever is greater.

AB462,16 Section 16. 102.85 (2) (intro.) of the statutes is amended to read:

AB462,8,10 102.85 (2) (intro.) An For each act occurring after the date of the first determination under this subsection, an employer who is required to provide worker’s compensation insurance coverage under this chapter shall forfeit not less than $100 nor and not more than $1,000 if the employer does any of the following:

AB462,17 Section 17. 102.85 (2j) of the statutes is created to read:

AB462,8,14 102.85 (2j) For each act occurring after the date of the 3rd determination under sub. (2), an employer who is required to provide worker’s compensation insurance coverage under this chapter shall forfeit $3,000 per violation.

AB462,18 Section 18. 102.85 (2k) of the statutes is created to read:

AB462,8,18 102.85 (2k) For each act occurring after the date of the 4th determination under sub. (2), an employer who is required to provide worker’s compensation insurance coverage under this chapter shall forfeit $4,000 per violation.

AB462,19 Section 19. 103.005 (4m) of the statutes is created to read:

AB462,8,22 103.005 (4m) (a) The department shall design and make available to employers a notice regarding worker classification laws, requirements for employers and employees, and penalties for noncompliance.

AB462,9,3 (b) All employers shall post, in one or more conspicuous places where notices to employees are customarily posted, the notice designed by the department under par. (a). Any employer who violates this paragraph shall forfeit not more than $100 for each offense.

AB462,9,7 (c) The department shall establish and maintain on the department’s website information regarding worker classification laws, requirements for employers and employees, penalties for noncompliance, and contact information at each state agency that administers worker classification laws.

AB462,20 Section 20. 108.221 (1) (a) of the statutes is renumbered 108.221 (1) (a) (intro.) and amended to read:

AB462,9,15 108.221 (1) (a) (intro.) Any employer described in s. 108.18 (2) (c) or engaged in the painting or drywall finishing of buildings or other structures who knowingly and intentionally provides false information to the department for the purpose of misclassifying or attempting to misclassify an individual who is an employee of the employer as a nonemployee shall, for each incident, be assessed a penalty by the department as follows:

AB462,9,19 1. For each act occurring before the date of the first determination of a violation of this subsection, the employer shall be assessed a penalty in the amount of $500 for each employee who is misclassified, but not to exceed $7,500 per incident.