Can a business commit a crime? Not the owner or employees, but the business itself? More and more often, the answer is, “Yes.”
The owners of a construction company in Delaware County, Pennsylvania, recently learned that the hard way. District Attorney Jack Stollsteimer charged G&R Drywall and Framing with misclassification of its workers. That’s been a criminal offense in Pennsylvania since 2011, but this is the first such prosecution.
It was an outgrowth of a pilot program run jointly by Stollsteimer’s office and the state’s Attorney-General, said ttorney Brionna L. Denby of Cohen Seglias, a law firm specializing in construction cases. Denby said misclassification cases are typically enforced through civil actions, with monetary penalties imposed against individuals or businesses.
So why would a county prosecutor pursue criminal charges this time? Denby said the main reason is criminal charges carry more weight. She said the damage to a business’s reputation from being charged with a crime is often longer lasting than in a civil case. This sends a message to the entire industry. Also, businesses tend to react more quickly to the threat of criminal charges than the threat of a civil lawsuit.
“The penalties associated with civil enforcement of worker misclassification are monetary fees and fines,” Denby said. “However, if the monetary penalties are not large enough to deter the bad activity, compliance with the statute will not be viewed with the same level of seriousness as a criminal charge.
“Also, settlement agreements in civil cases are typically confidential and its contents are not disclosed to the public. Therefore, a business may have multiple civil violations that occur civilly which remain unknown to the public.”
A Business Is a ‘Person’ Under the Law
Many people are surprised a business itself can be charged with a crime. Chris Carusone, another Cohen Seglias attorney, said businesses are treated as “persons” under the law. This means they can be charged with a crime, just like they can be sued. The business doesn’t face jail time, but the financial punishment is considerable. The court can also sentence the business to probation, meaning it is monitored by the courts for a set period of time.
The decision to pursue criminal charges often depends on a number of considerations, Carusone said. These include the nature and seriousness of the offense, how widespread the misconduct is (including the number of employees involved), the risk of harm to the public, and the history of similar conduct — including previous civil and criminal enforcement action.
“Criminally charging business entities is becoming more common and is usually a law enforcement tool used to send a stronger message,” Carusone said.
Often these cases involve safety issues. For example, a Massachusetts district attorney charged an automotive business with five counts of manslaughter after an employee crashed into a crowd of people. But all sorts of violations can bring criminal charges. In the Pennsylvania case, it had to do with the contractor saying employees were independent contractors.
Keep Track of Compliance
Commercial HVAC contractors often bring in extra help when working on a large project, so they need to take the steps necessary to avoid this kind of confusion. Denby said management needs to ensure the actions of lower-level employees follow all the requirements for completing and transmitting paperwork certifying information relating to worker classification. She said that if misconduct is discovered, management needs to conduct an internal investigation and hire a law firm.
HVAC contractors face other threats if they misclassify employees, Carusone said. These include losing their licenses and facing federal charges related to environmental, tax, or immigration concerns, among others. The best way to avoid problems is through a compliance programs designed to prevent and detect worker misclassification, fraud, or misconduct.
An HVAC contracting business itself can face criminal charges. County prosecutors and other authorities are using this tool more often when pursuing actions against businesses. HVAC contractors need to make sure they have the right protections in place to avoid running afoul of the law.