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Federal and State Agencies Join Forces against Worker Misclassification
The U.S. Department of Labor, the Internal Revenue Service and labor agencies in 11 states have either signed or agreed to sign memoranda of understanding that will enable the agencies to share information and coordinate law-enforcement efforts against businesses that misclassify employees as independent contractors. The state agencies include those in Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Utah and Washington.
When businesses misclassify employees, governments lose an enormous amount of tax revenue. In fact, the U.S. Government Accountability Office recently found that the federal government could lose as much as $7 billion in payroll-tax revenue over the next decade due to misclassification.So it should come as no surprise that in these belt-tightening times, both federal and state agencies are increasing their efforts to rein in misclassification.
Employers should take note: Misclassifying employees violates multiple federal and state laws, including laws that require --
- Paying minimum wage and overtime;
- Allowing meal and rest breaks;
- Recognizing the right of employees to organize and bargain collectively;
- Allowing employee leave for the employee's or his/her family member's medical needs;
- Paying unemployment insurance, workers' compensation and payroll taxes; and
- Maintaining minimum workplace safety standards.
Accordingly, employers who violate these laws run the risk of liability for unpaid wages, overtime, meal and rest breaks, employee benefits, unemployment contributions, workers' compensation and taxes – and the associated penalties.
Proper classification of employees and independent contractors is not a simple or self-evident matter. Employers should train their managers and HR personnel on the basic principles of worker misclassification to protect themselves against substantial liability risks.
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Posted by Ken Grosserode on October 18, 2011 Ken Grosserode, a Managing Legal Editor at WeComply, writes and edits the content for e-learning courseware and related compliance training resources. Earlier in his career, Ken worked for the U.S. Department of Justice after being accepted into the Attorney General's Honors Program. He later practiced law as an associate attorney at Berry, Appleman & Leiden LLP in San Francisco. Ken holds a J.D. from the University of San Francisco School of Law. |
Tags: Worker Classification
