Dive Brief:

• Virginia Attorney General Mark Herring this month announced the creation of the state's first worker protection unit, a team dedicated to informing Virginia workers of their rights and prosecuting those who exploit them.
• The unit's first priority will be bringing cases and enforcement action against individuals and businesses that commit wage theft and payroll fraud, as well as those who misclassify their workers as independent contractors. As of 2012, according to Virginia's Joint Legislative Audit and Review Commission, as many as one-third of audited businesses misclassified employees, an action which reduced worker pay and benefits and cost the state as much as $28 million in tax revenue each year.
• The new unit, a multidisciplinary team of attorneys in Herring's office, will also help enforce recently imposed regulations that make general contractors liable for subcontractor employee wages and require employers to issue standardized pay statements to their workers.

Dive Insight:

State attorneys general across the U.S., according to a report from the Economic Policy Institute, have stepped in to protect worker rights using their relatively wide range of powers, enforcement and otherwise. Between mid-2015 and the summer of 2020, the EPI said, AG offices in five states — Illinois, Michigan, Minnesota, New Jersey, and Pennsylvania — and the District of Columbia have created worker protection units. California, Massachusetts and New York also have similar enforcement arms.

Even without special teams, AGs have the power to investigate and prosecute crimes against workers, but creation of these focused units, the EPI said, work as a deterrent to those considering engaging in wage fraud and institutionalizes the work, helping to ensure that the mission of protecting workers survives from administration to administration.

Payroll fraud and employee misclassification have long been a problem in the construction industry. In addition to cheating workers out of what is due to them, and as the Virginia JLARC reports, the illicit efforts to reduce costs give those contractors an unfair advantage over the construction companies that adhere to the law.

When authorities go after these rulebreakers, the fines and penalties can be severe. Just this month, a New Jersey construction company agreed to pay more than $1 million in restitution to employees who had been cheated out of their correct pay. Prosecutors said that certain Unimak employees were required to give cash kickbacks out of their paychecks to the company's payroll manager. This reduced their pay to a rate less than the prevailing wage required on the public projects for which Unimak performed work.

In addition to the fine, Unimak is barred from performing state work for three years, and the payroll manager, Toni Javanoski, has been charged with two criminal offenses.

Clarification: The headline of this story was changed to reflect the fact that Virginia is the ninth state to create a worker protection unit.