EXECUTIVE ORDER No. 2008-1

INTERAGENCY TASK FORCE ON EMPLOYEE MISCLASSIFICATION

WHEREAS, Section 1 of Article V of the Michigan Constitution of 1963 vests the executive power of the State of Michigan in the Governor;
 
WHEREAS, employers in Michigan and elsewhere too often misclassify individuals they hire as independent contractors, even when those individuals should legally be classified as employees;

WHEREAS, when an employee is misclassified as an independent contractor, the employer potentially violates a number of legal obligations under state and federal labor, employment, and tax laws;

WHEREAS, employee misclassification significantly harms Michigan workers who are deprived of their important legal rights and protections;

WHEREAS, employee misclassification is unfair to the overwhelming majority of Michigan job providers who play by the rules because law-abiding businesses are placed at a competitive disadvantage compared to those who avoid their legal obligations;

WHEREAS, employee misclassification significantly harms Michigan taxpayers because employers that misclassify employees illegally avoid financial obligations to the State of Michigan;

WHEREAS, the various Michigan laws relating to employee misclassification have historically been enforced by separate state departments and agencies; 

WHEREAS, a number of enforcement agencies within the Department of Labor and Economic Growth have already begun to coordinate their employee misclassification enforcement activities, but a task force to share information and coordinate enforcement across different state departments would greatly enhance the state's law enforcement efforts;

NOW, THEREFORE, I, Jennifer M. Granholm, Governor of the State of Michigan, by virtue of the power and authority vested in the Governor by the Michigan Constitution of 1963 and Michigan law, order the following:

I. DEFINITIONS

As used in this Order:

A. "Department of Labor and Economic Growth" means the principal department of state government created as the Department of Commerce under Section 225 of the Executive Organization Act of 1965, 1965 PA 380, MCL 16.325, renamed the Department of Consumer and Industry Services under Executive Order 1996-2, MCL 445.2001, and renamed the Department of Labor and Economic Growth under Executive Order No. 2003-18, MCL 445.2011.

B. "Department of Management and Budget" means the principal department of state government created under Section 121 of The Management and Budget Act, 1984 PA 431, MCL 18.1121.

C. "Department of Treasury" means the principal department of state government created under Section 75 of the Executive Organization Act of 1965, 1965 PA 380, MCL 16.175.

D. "Task Force" means the Interagency Task Force on Employee Misclassification created under this Order.

II. CREATION OF THE INTERAGENCY TASK FORCE ON EMPLOYEE MISCLASSIFICATION

A. The Task Force on Employee Misclassification is created as an advisory body within the Department of Labor and Economic Growth.

B. The Task Force shall include the Director of the Department of Labor and Economic Growth or his or her designee and the following members appointed by the Governor:

1. An individual representing the Wage and Hour Division of the Department of Labor and Economic Growth.

2. An individual representing the Workers' Compensation Agency of the Department of Labor and Economic Growth.

3. An individual representing the Unemployment Insurance Agency of the Department of Labor and Economic Growth.

4. An individual representing the Discovery and Tax Enforcement Division of the Department of Treasury. 

5. An individual representing the Business Services Administration of the Department of Management and Budget.

C. Of the members of the Task Force appointed under Section II.B., one member shall be appointed for a term expiring on December 31, 2008, one member shall be appointed for a term expiring on December 31, 2009, one member shall be appointed for a term expiring on December 31, 2010, and two members shall be appointed for terms expiring on December 31, 2011.  After the initial appointments, members shall be appointed to serve terms of four years.

D.A vacancy on the Task Force shall be filled in the same manner as the original appointment.

E. The Director of the Department of Labor and Economic Growth or his or her designee shall serve as Chairperson of the Task Force.

III. CHARGE TO THE TASK FORCE

A. The Task Force shall do all of the following:

1. Examine and evaluate existing employee misclassification enforcement mechanisms in Michigan and other jurisdictions, and make recommendations for more effective enforcement mechanisms.  In particular, the Task Force should examine and evaluate the existing employee misclassification enforcement mechanisms arising under the Minimum Wage Law of 1964, 1964 PA 154, MCL 408.381 to 408.398; 1978 PA 390, MCL 408.471 to 408.490; the Michigan Employment Security Act, 1936 (Ex Sess) PA 1, MCL 421.1 to 421.75; the Worker's Disability Compensation Act of 1969, 1969 PA 317, MCL 418.101 to 418.941; 1965 PA 166, MCL 408.551 to 408.558; and the Income Tax Act of 1967, 1967 PA 281, MCL 206.1 to 206.532.

2. Create a system for sharing information relating to suspected employee misclassification violations among Task Force member agencies, to the extent possible under existing Michigan law.

3. Establish a protocol through which individual Task Force member agencies investigating employee misclassification matters under their own statutory or administrative authority will refer a matter to other Task Force member agencies for assessment of potential liability under other relevant authority.

4. Explore information sharing possibilities with investigators in other jurisdictions.

5. Identify barriers to information sharing under current state law and recommend to the Governor proposed executive or legislative actions needed to overcome the barriers.

6. Facilitate the pooling, focusing, and targeting of investigative resources, to the extent possible under current Michigan law.

7. Develop strategies for systematically investigating employee misclassification within those industries in which misclassification is most common.

8. Identify significant cases of employee misclassification that should be jointly investigated and, to the extent possible under existing Michigan law, form joint enforcement teams to utilize the collective investigative and enforcement capabilities of Task Force member agencies.

9. Work cooperatively with local, state, and federal law enforcement agencies, including sharing information with the Internal Revenue Service and establishing a systematic procedure for referring cases to the Attorney General or local or federal prosecutors.

10. Work cooperatively with state, federal, and local social services agencies to provide assistance to workers that have been exploited by employee misclassification.

11. Work cooperatively with business, labor, and community groups interested in reducing employee misclassification, including but not limited to both of the following:

a. Seeking ways to prevent employee misclassification, such as through the dissemination of educational materials regarding the legal differences between independent contractors and employees.

b. Enhancing mechanisms for identifying and reporting instances of employee misclassification.

12. Consult with representatives of business, organized labor, and other entities, including the Michigan Economic Development Corporation, about the employee misclassification enforcement activities of the Task Force and its member agencies, and ways of improving operations.

13. Increase public awareness of the illegal nature of and harms inflicted by employee misclassification.

14. Establish procedures for soliciting referrals or information from the public, including through a telephone hotline.

B. The Task Force shall issue a report to the Governor on July 1 of each year, which shall detail the accomplishments of the Task Force, identify any administrative or legal barriers that might be impeding the more effective operation of the Task Force, and make recommendations for executive or legislative measures to improve employee misclassification enforcement.

IV. OPERATIONS OF THE TASK FORCE

A. The Task Force shall be staffed and assisted by personnel from the Department of Labor and Economic Growth as directed by the Governor, subject to available resources and funding.

B. The Task Force shall adopt procedures consistent with Michigan law and this Order governing its organization and operations.

C. The Department of Labor and Economic Growth shall assist the Task Force with recordkeeping responsibilities.

D. A majority of the members serving on the Task Force constitutes a quorum for the transaction of the Task Force's business.  The Task Force shall act by a majority vote of its serving members.

E. The Task Force shall meet at the call of the Chairperson.

F. The Task Force may, as appropriate, make inquiries, studies, investigations, hold hearings, and receive comments from the public.  The Task Force may also consult with outside experts in order to perform its duties, including, but not limited to, experts in the private sector, organized labor, government agencies, and at institutions of higher education.

G. The Task Force may hire or retain contractors, sub-contractors, advisors, consultants, and agents, and may make and enter into contracts necessary or incidental to the exercise of the powers of the Task Force and the performance of its duties as the Director of the Department of Labor and Economic Growth deems advisable and necessary, in accordance with this Order, and the relevant statutes, rules, and procedures of the Civil Service Commission and the Department of Management and Budget.

H. Members of the Task Force shall refer all legal, legislative, and media contacts to the Department of Labor and Economic Growth.
 
V. MISCELLANEOUS

A. All departments, committees, commissioners, or officers of this state shall give to the Task Force, or to any member or representative of the Task Force, any assistance required in the performance of the duties of the Task Force so far as is compatible with its, his, or her duties.

B. Any suit, action, or other proceeding lawfully commenced by, against, or before any entity affected by this Order shall not abate by reason of the taking effect of this Order.

C. The invalidity of any portion of this Order shall not affect the validity of the remainder of the Order.

This Order is effective upon filing.

Given under my hand and the Great Seal of the State of Michigan this 1st day of February in the year of our Lord, two thousand and eight.

JENNIFER M. GRANHOLM
GOVERNOR

BY THE GOVERNOR:

SECRETARY OF STATE