Our Human Resources Blog

Identifying companies who misclassify employees has been a main focus for many state and local government agencies the last few years.  This year the Department of Labor has made it a top priority at the federal level as well. 

According to the Department of Labor (DOL), when employees are misclassified as "independent contractors" they are ineligible for benefits and protections in which they are legally entitled. Independent contractors by definition are self employed and are not covered by employment, labor and various tax withholding laws. Some employers classify workers as independent contractors to help cut costs-- costs that include taxes, payment of overtime & benefits and workers compensation liability.

The US Department of Labor FY 2011 budget request includes an increase of over $20 million. With this budget increase the DOL expects to hire more than 350 new employees, including 177 investigators and other enforcement staff. The initiative would improve the ability of agencies to identify misclassification through increased information sharing and audits in high risk industries.  

The consequences for employers could be harsh. Employers who are found to have violated labor laws would be required to pay- back taxes, back wages, unpaid workers compensation premiums and unemployment premiums. In addition to and depending on which laws were violated there would also be the potential for additional liability.

Now more than ever, it is crucial for employers to take a good look at their workers to make certain they are classified correctly. Employers who misclassify workers are at a huge risk of getting audited and the stakes associated with this misclassification are only getting higher and higher each year!