AG Nessel cracks down on fraudulent payroll schemes, threatens criminal charges

By the end of the week 10 businesses will be forced to produce payroll records

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Tuesday morning Michigan Attorney General Dana Nessel announced her plans to potentially pursue both criminal and civil charges against Michigan businesses allegedly operating fraudulent payroll schemes.

Nessel has received nearly 100 complaints of payroll fraud following the April launch of the Payroll Fraud Enforcement Unit's tip line and website. 

Complaints regarding payroll typically involve missclassifying workers, failing to pay employees overtime and compensating them "under the table" to sidestep paying taxes and benefits. The filed grievances have suggested the number of workers allegedly affected by these malpractices may extend to over 300 Michigan residents. The hospitality/restaurant, entertainment, construction and trucking industries were among the most commonly reported.

According to a Michigan State University study, when businesses report employees as self-employed or independent contractors and then pay workers off the table, Michigan taxpayers are shortchanged about $107 million a year in revenue.  

“Payroll fraud affects all of us, especially the families who are robbed," Nessel said. "When shady businesses exploit people by cheating them of the wages they are owed, families have less money in their pockets, zero benefits and an uncertain future. No family should live in poverty because greedy businesses cheat the system and refuse to play by the rules. This has gone on for far too long and Michigan isn’t going to wait any longer to crack down on these crimes.”

Nessel's office plans to follow up on every filed complaint in tandem with the Department of Labor, the Internal Revenue Service, the Michigan Department of Treasury, the Wage and Hour Bureau and its Unemployment Insurance Agency. By the end of the week, at least 10 Michigan businesses will receive letters from Nessel's office demanding proof of business records. If they fail to comply, Nessel threatens to file subpoenas and warrants in order to obtain information regarding fraudulent payroll devices. 

According to Nessel's press release, "This month’s actions are intended to send a clear message to Michigan-based businesses: Pay employees what they are entitled to or the Michigan Attorney General’s Office will step in."