PROVIDENCE — The House overwhelmingly voted for legislation Wednesday that will increase the penalties for wage theft and employment fraud — a tool that supporters say will punish employers who take advantage of workers.
House Speaker K. Joseph Shekarchi called the bills “historic.”
The companion bills, sponsored by Democratic Representative Robert E. Craven Sr., of North Kingstown, and Senator Meghan Kallman, representing Pawtucket and Providence, give more power to the state Department of Labor and Training and the attorney general’s office the ability to bring felony charges to serious offenders.
The bills will make it a felony to “knowingly and willfully” commit wage theft of more than $1,500. (Currently, it’s a misdemeanor.)
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The legislation also lays out how the Department of Labor and Training will audit companies and investigate complaints of employee misclassification, following the federal regulations in the Fair Labor Standards Act. A specialized investigatory team at the DLT will have the authority to determine whether the issues are good faith errors, or violations that require civil penalties or referral to the attorney general’s office for criminal charges.
Some company owners and chambers of commerce had voiced concerns about being prosecuted by the attorney general’s office for mistakes, said Representative Jason Knight, Democrat of Barrington and Warren. So, the legislation was amended to allow investigators to filter out the innocent mistakes from incidents where employers are willfully stealing from workers, he said.
The legislation will require the attorney general’s office and the DLT to produce annual reports about wage theft and misclassified employees in Rhode Island. It also calls for more public education for workers and an assessment about the industries and areas in Rhode Island where workers are more likely to be victims of wage theft and employment fraud.
The bills also hone in on the construction industry, with enhanced criminal penalties, including felony charges, for misclassification of employees. The worst offenders, as the Rhode Island underground economy and employee misclassification task force found, were often construction companies and subcontractors, according to the task force’s annual report.
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“This legislation is significant step forward in protection for men, women and nonbinary workers,” said Representative David Morales, of Providence. “Whether it’s construction or everyday retail, everyone deserves protections and ... that they are paid for an honest day’s work.”
Shekarchi thanked chief legal counsel Danica Iacoi for her work in shepherding the legislation over the last two years and led the House in a standing ovation. Both bills passed with little opposition; Republican representatives George Nardone, of Coventry, and Robert Quattrocchi of Scituate were the sole votes against the bills.
Kallman’s original bill was passed by the Senate on June 8. Her amended bill and Craven’s bill will both go to the full Senate for a vote Thursday.
The attorney general’s office, unions, immigrant advocacy groups, and the DLT had long urged the General Assembly to put some teeth into the laws to help stop the chronic problems in the underground economy. They saw companies that hired employees off the books, paying them less than they deserved or not at all, and calling them “independent contractors” when it was obvious the workers had no independence.
Employees had no protections and were losing money. The state was losing tax revenue. And honest companies that followed the laws and paid workers fairly had to compete with others that cut corners.
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“Regulatory tools remain disproportionate to the severity of the harm that wage theft and misclassification cause to Rhode Island workers and taxpayers,” DLT director Matthew Weldon wrote in the 2021 and 2022 annual report by the Rhode Island underground economy and employee misclassification task force.
The DLT has estimated this practice probably costs Rhode Island tens of millions of dollars in uncollected income tax and uncollected premiums for unemployment insurance, temporary disability insurance, and workers’ compensation insurance.
Just last year, the DLT’s employer tax unit found 949 people who’d been misclassified and nearly $10.3 million in underreported wages. The DLT’s labor standards unit also investigated and found $654,065 in wage violations and assessed $663,000 in misclassification penalties.
The unions that have led efforts to educate workers about their rights on unannounced visits at construction sites said the legislation will help protect workers.
“It’s been a long time coming with employers ripping off workers for years in the state with impunity,” said Justin Kelley, business representative of Rhode Island Painters and Allied Trades. “We are very excited to see that the assembly has finally taken the appropriate action to ensure that the law protects working people. It is long overdue. We intend to ensure that every working man and woman who works for a living is protected moving forward using this new law.”
This story has been updated with the scheduled vote in the Senate on both bills.
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Amanda Milkovits can be reached at amanda.milkovits@globe.com. Follow her on Twitter @AmandaMilkovits.