Wisconsin Joins DOL’s Worker Misclassification Initiative

On January 20, 2015, the U.S. Department of Labor announced that Wisconsin has also joined the growing list of states that have entered into formal agreements with the DOL to share information about worker misclassification.  Under the terms of a "partnership agreement," the DOL and the Wisconsin Department of Workforce Development agreed to share information about workers who may be improperly classified as independent contractors instead of employees.  The DOL's news release can be found here.

As noted here previously, workers who are misclassified as contractors may be denied benefits, minimum wage, and overtime pay that they might receive if properly classified as employees.  Likewise, the federal government and state taxing authorities miss out on payroll and other taxes that they would receive if the workers were properly classified. 

By sharing information, the DOL and the states participating in the initiative hope to reduce misclassification and increase compliance with employment, wage and hour, and tax laws.  The DOL reports that similar agreements have been entered into with the states of Alabama, California, Colorado, Connecticut, Florida, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New York, Utah and Washington.

Florida Joins U.S. DOL’s Worker Misclassification Initiative

On January 13, 2015, the U.S. Department of Labor announced that Florida joined the ranks of states that have entered into formal agreements with the DOL to share information about worker misclassification.  Under the terms of a memorandum of understanding, the DOL and the Florida Department of Revenue agreed to share information about workers who may be improperly classified as independent contractors instead of employees.  The announcement can be found here.

Workers who are misclassified as contractors may be denied benefits, minimum wage, and overtime pay that they might receive if properly classified as employees.  Likewise, the federal government and state taxing authorities miss out on payroll and other taxes that they would receive if the workers were properly classified. 

By sharing information, the DOL and the states participating in the initiative hope to reduce misclassification and increase compliance with employment, wage and hour, and tax laws.  The DOL reports that similar memoranda of understanding have been entered into with the states of Alabama, California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Utah and Washington.

DOL Set to Share Employee Misclassification Information with the IRS and States

In what appears to be another example of cracking down on the improper use of independent contractors, the U.S. Department of Labor (“DOL”) recently announced it is entering into agreements with the IRS, as well as some state agencies (including Illinois state agencies), to share information regarding employers who have improperly classified employees. The DOL maintains that these arrangements are necessary to share information and coordinate law enforcement with the participants to end the practice of misclassifying employees. However, it is clear that this collaboration has as much to do with enhancing the inflow of tax revenues as it does with protecting employees.

What this practically means for businesses is that if the DOL determines that an independent contractor is misclassified, it can share that determination and evidence with, for example, the Illinois Department of Employment Security or other state agencies, which could very well lead to additional investigations, fines, fees and liability upon the business beyond those by IDOL. In light of this, every company with a business model based, in whole or in part, upon the use of independent contractors should prepare itself for this new enforcement activity and immediately consult with an employment attorney to perform an audit of those workers.

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