Advance Notice: Briefs

Whitmer announces steps to fight payroll fraud 

By: - April 15, 2021 2:11 pm

Spencer Platt/Getty Images

Gov. Gretchen Whitmer on Thursday announced rule changes for state contract bids. The protections, in connection to her 2019 executive directive, are designed to “level the playing field for companies that play by the rules” and allow them to compete fairly “while protecting workers’ wages and health care.” 

“We want Michigan to be a home for opportunity for everyone, which begins with supporting businesses that provide fair wages and good benefits.” said Whitmer. “Today’s actions strengthen our commitment to these priorities and bring the greatest possible benefit to Michigan’s businesses, workers and families.”  

Under the new protocols, the Department of Technology, Management and Budget (DTMB) will have bidders complete a vendor questions worksheet, which includes disclosure of a bidder’s labor and environmental compliance record, disclosure of information related to economic impact in Michigan, and a certification that the bidder has properly classified its employees. DTMB said that the measures will protect workers against payroll fraud, which can happen when a business improperly classifies its employees as “independent contractors,” which can deprive employees of access to overtime pay, workers’ compensation, health care and other benefits. 

By taking these steps, DTMB said, the state will be able to account for the overall economic impact of the potential supplier’s bid on Michigan businesses and workers, the wages and benefits offered by the supplier to its workers, the supplier’s track record of labor and environmental compliance, and the supplier’s commitment to economically-disadvantaged zones. The department also will be able to use the information obtained through the disclosures on the vendor questions worksheet to incorporate consideration of labor and environmental track records into the procurement process.

Payroll fraud has been a big issue for organized labor, particularly the United Brotherhood of Carpenters and Joiners of America. It cost Michigan workers an estimated $429 million in wages and overtime pay between 2013 and 2015, impacting more than 2.8 million workers, according to an analysis from the Economic Policy Institute, a Washington, D.C.-based think tank.

Meanwhile, 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 their fair share of taxes, a Michigan State University study found.  

In 2019, Michigan Attorney General Dana Nessel created a special task force to investigate and prosecute payroll fraud. The same year, Democrats in the state Legislature introduced measures to address the issue.

“No family should live in poverty because greedy businesses cheat the system and refuse to play by the rules,” said Nessel at the time. “This has gone on for far too long and Michigan isn’t going to wait any longer to crack down on these crimes.”

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Ken Coleman
Ken Coleman

Ken Coleman covers Southeast Michigan, economic justice and civil rights. He is a former Michigan Chronicle senior editor and served as the American Black Journal segment host on Detroit Public Television. He has written and published four books on black life in Detroit, including Soul on Air: Blacks Who Helped to Define Radio in Detroit and Forever Young: A Coleman Reader. His work has been cited by the Detroit News, Detroit Free Press, History Channel and CNN. Additionally, he was an essayist for the award-winning book, Detroit 1967: Origins, Impacts, Legacies. Ken has served as a spokesperson for the Michigan Democratic Party, Detroit Public Schools, U.S. Sen. Gary Peters and U.S. Rep. Brenda Lawrence. Previously to joining the Advance, he worked for the Detroit Federation of Teachers as a communications specialist. He is a Historical Society of Michigan trustee and a Big Brothers Big Sisters of Metropolitan Detroit advisory board member.