Iowa is the latest State to sign a Memorandum of Understanding and join forces with the U.S. Department of Labor to combat employee misclassification.  Although Labor Secretary Solis has announced her resignation, it appears that the Misclassification Initiative that she championed continues, at least for now.

As mentioned in a previous post, these Memorandums of Understanding with state government agencies arose as part of the DOL’s Misclassification Initiative, with the goal of preventing, detecting and remedying employee misclassification.  Iowa is now the fourteenth State to sign one of these Memorandums after California, Colorado, Connecticut, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington.  The Memorandums allow the DOL to share information and to coordinate efforts with participating states as part of its Misclassification Initiative.

For nearly sixteen months, the DOL has been going after employers who misclassify employees as independent contractors.  Since September 2011, the Wage and Hour Division has collected more than $9.5 million in back wages, primarily for minimum wage and overtime violations under the FLSA, which resulted from more than 11,400 workers being misclassified as independent contractors or otherwise not properly treated as employees.  The DOL has stated that this represents an 80% increase in back pay and 50% increase in the number of workers receiving back pay since these agreements have been implemented between the DOL and the States. 

Insight for Employers

It is important to remember that whether a worker is an independent contractor or an employee is a very fact specific analysis.  If the misclassification of a worker as an independent contractor occurs, these employees may be denied appropriate wages and benefits.  Similar to the misclassification of an employee as exempt, failure to properly classify a worker as an employee may lead to significant liability.  Because of the amount of money at issue when employee(s) are misclassified, it may be worth a few minutes of your time to confirm with an experienced employment attorney that your workers are properly classified.