On 9/19/2011, Secretary of Labor Hilda L. Solis hosted a ceremony at U.S. Department of Labor headquarters in Washington to sign a memorandum of understanding with the Internal Revenue Service that will improve departmental efforts to end the business practice of misclassifying employees in order to avoid providing employment protections. In addition, labor commissioners and other agency leaders representing seven states signed memorandums of understanding with the department’s Wage and Hour Division and, in some cases, its Employee Benefits Security Administration, Occupational Safety and Health Administration, Office of Federal Contract Compliance Programs and Office of the Solicitor. The signatory states are Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah and Washington. Secretary Solis also announced agreements for the Wage and Hour Division to enter into memorandums of understanding with the state labor agencies of Hawaii, Illinois and Montana, as well as with New York’s attorney general.
The memorandums of understanding will enable the U.S. Department of Labor 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.
What Should You Do?
Audit your employee and independent classifications to determine any misclassifications. Once you know what needs to be changed, you need to make those changes. It will come at a cost, so be prepared. Misclassifying can’t be fixed for free by the very nature of the misclassifications. Get professional advice on how to clean this up to avoid it coming back as an issue at some point.
