Massachusetts Governor Patrick Administration Announces New Hotline, Website for Public to Report Workplace Fraud Activity

Boston, MA  (CompNewsNetwork) - Secretary of Labor and Workforce Development Suzanne M. Bump today announced a new toll-free hotline, 1-877-96-LABOR and website www.mass.gov/dol/labortaskforce, for the public to report suspected cases of workplace fraud in the Bay State.  These new outreach tools follow Governor Deval Patrick's signing in March of an Executive Order which established the Joint Task Force on the Underground Economy, chaired by Director of Labor George E. Noel.

"Stamping out such fraud is a high priority of the Patrick Administration,” said Secretary Bump.  "The hotline and website are ways to report wrongdoing so that we can restore fairness in our state's economy and help those who go to work each day to earn an honest day's wage.

Secretary Bump also announced the appointment of attorney Michael Bradley, formerly of the Norfolk County District Attorney's Office and the Plymouth County Sheriff's Office, as Executive Director of the Joint Task Force to handle its day to day operational issues, including follow up from the incoming tips provided to the hotline and website.

The Underground Economy Task Force, comprised of more than 12 agencies, share investigative information in an effort to increase enforcement against employers who commit fraud.

Examples of the underground economy includes employers who misclassify their employees as independent contractors, establish separate business entities to avoid paying unemployment insurance premiums, employers who do not have a workers' compensation policy or employers who pay their employees in cash or engage in other "off-the-books” schemes to conceal their activities as well as claimants that collect unemployment insurance and/or workers' compensation benefits while working.

"We hope the Task Force can address the myriad of issues—for workers and the Commonwealth—which affect the fairness of the workplace,” said Attorney General Martha Coakley, whose office participates on the Task Force.

As Task Force Chair, Director Noel is seeking to bolster information sharing that will result in tougher enforcement and prosecution. For example, the Department of Industrial Accidents and Division of Unemployment Assistance provided information to the Massachusetts Insurance Fraud Bureau, the Internal Revenue Service, the Federal Bureau of Investigation and the US Attorney's Office in connection with the prosecution of Daniel McElroy and Aimee King McElroy.  In February 2008, McElroy and King were convicted of mail fraud, tax fraud and conspiracy. The charges stemmed from the defendants' operation of a temporary employment agency that did business under several different names and paid more than $60 million in under-the-table payroll to avoid paying payroll taxes and to fraudulently reduce the business' premiums for workers compensation insurance.

Director Noel, who noted the Task Force is focusing its efforts on employers who commit fraud and not against other segments of the population, said, "There are no winners when fraud in the workplace occurs.  It is why strong and swift action needs to be taken against those employers who commit fraud.  Workplace fraud translates into millions in revenue lost that could otherwise be used to fund vital programs and services.”

An example of how the Task Force initiative is working to reduce fraud is in the 580 Stop Work Orders issued by the state Department of Industrial Accidents (DIA) against employers operating without a workers' compensation policy since the start of 2008, a dramatic increase over the largest number of orders issued during any comparable time period.

DIA Commissioner Paul V. Buckley attributes the increase to a change in agency approach in part to a quicker investigative process, which now includes conducting agency "sweeps” in geographic areas and business sectors known to have high numbers of non-compliant employers.   "DIA investigators ask for proof of a workers compensation policy, and now issue a Stop Work Order on the spot if they cannot show us proof of a policy.  We hope our efforts will serve as a warning to employers operating without a workers' compensation policy that they cannot escape the law,” said Commissioner Buckley.

Statewide, a 2004 Harvard University study on the Underground Economy in the Massachusetts construction industry conservatively estimates that the Commonwealth lost nearly $100 million in unpaid income tax payments and another $100 million in unpaid workers' compensation contributions from 2001-2003 alone. Across all industries, it is believed that 13 percent of employers were found to under-report workers wages and unemployment insurance tax liability to the Commonwealth, a number thought to be as high as 24 percent of employers in the construction industry.

For further information on the Joint Task Force efforts to combat workplace fraud, visit www.mass.gov/dol/labortaskforce.

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