The Louisiana Department of Revenue has announced that a new law designed to waive taxes and penalties for employers who misclassify their workers as independent contractors instead of employees will not go into effect in January because it violates federal law. Under the Fresh Start Proper Worker Classification Initiative, which was enacted by Act 297 of the 2021 Regular Session, employers who misclassify their workers as independent contractors would be allowed to reclassify those workers without incurring liability for unemployment taxes or penalties for prior periods.

In a bulletin posted on December 1, 2021, the Department of Revenue announced an emergency rule, effectively halting a key provision of the Fresh Start Program. According to the emergency rule, the Program is “not in conformity with” the Federal Unemployment Tax Act or the State Unemployment Tax Act. Specifically, the rule notes that “[w]aiving employer liability for back UI taxes is not permissible under federal unemployment compensation (UC) law and regulations.”  As a result, key provisions of the Fresh Start Program are effectively halted as long as the emergency rule is in place.

Employee misclassification is a serious issue, and misclassifying your workers can result in serious fines and penalties. If you or your business needs assistance with worker classification or other employment law matters, reach out to a labor and employment law attorney at Roedel Parsons.