By Robert R. Roginson The Unites States Department of Labor (DOL) and Internal Revenue Service (IRS) have signed a memorandum of understanding to improve the agencies' coordination on employee misclassification compliance and education, according to a press release issued today by the Secretary of Labor, Hilda Solis. The DOL reports that 11 states have also agreed to sign similar memoranda. A copy of the press release is available here. According to the DOL, the purpose of the coordinated effort is "to end the business practice of misclassifying employees in order to avoid providing employment protections." The labor commissioners and other agency leaders representing seven states have signed memorandums of understanding with the DOL. The signatory states are Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah and Washington. The states of Hawaii, Illinois and Montana, as well as with New York's attorney general are also identified as states expected to similar agreements. The DOL expects that the memorandums of understanding will enable the DOL to share information and coordinate law enforcement with the IRS and participating states in order "to level the playing field for law-abiding employers and ensure that employees receive the protections to which they are entitled under federal and state law." These memorandums of understanding arose as part of the department's Misclassification Initiative, which was launched under the auspices of Vice President Biden's Middle Class Task Force with the goal of preventing, detecting and remedying employee misclassification. Although California is not listed among the states which have signed or intend to sign the memorandum, California employers should be aware that worker misclassification has long been a high priority for the California Labor Commissioner, Attorney General and Employment Development Department. Worker misclassification has also become a target for class action lawsuits. The consequences for misclassifying workers can be significant and include claims for unpaid wages and overtime, meal and rest period premiums, payroll taxes, and penalties among other things. We will continue to bring you any developments in the increasingly important area of employment law.
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