DOL Action Reminds Employers Not to Misclassify Employees as Independent Contractors

Do you use independent contractors in your business?  Have you done any analysis to confirm that the individuals you call independent contractors are not employees?  Regardless of your answer, a recent Department of Labor announcement is a reminder that correcting employee misclassification continues to be priority for the DOL.

The DOL announcement concerns a partnership with the NY Labor Department and NY Attorney General’s Office to reduce misclassification of employees. According to the DOL, in the last two years, the DOL has secured over $18 million in back wages for workers wrongly classified as independent contractors.  The collaboration between the DOL and NY is part of the DOL’s Misclassification Initiative, which aims to prevent, detect and remedy employee misclassification though partnerships with state agencies.

The DOL explains: “Business models that attempt to change or obscure the employment relationship through the use of independent contractors are not inherently illegal, but they may not be used to evade compliance with federal labor law. Although legitimate independent contractors are an important part of our economy, the misclassification of employees presents a serious problem, as these employees often are denied access to critical benefits and protections–such as family and medical leave, overtime compensation, minimum wage pay and Unemployment Insurance–to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often find it difficult to compete with those who are skirting the law.”

Oregon has not entered into a memorandum of understanding with the DOL (although Washington has).  Nevertheless, the DOL announcement is a reminder to employers to carefully evaluate their independent contractor relationships to confirm that the contractors are properly classified.

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