DOL Refills States’ War Chests for Independent Contractor Misclassification Crackdown


The U.S. Department of Labor has awarded $10.2 million in grants to 19 states for continued independent contractor misclassification detection and enforcement. The grants are focused on unemployment insurance programs and, more specifically, companies’ failure to pay unemployment insurance premiums for workers treated as independent contractors but whom the states deem to be employees.

This will be the first year that the U.S. DOL has awarded grants dedicated to this purpose. The authority for the grants comes from the Consolidated Appropriations Act of 2014, which authorized this funding for “activities to address the misclassification of workers.”

The 19 states were selected through a competitive grant process, with a maximum amount of $500,000 available to each state.

Of the $10.2 million in total grant money available, $2 million was set aside for bonuses to award states with “high performance or most improved performance in detecting incidents of worker misclassification.” The four states sharing the $2 million bonus are Maryland, New Jersey, Texas and Utah, with the largest bonus ($775,529) being awarded to Texas.

The 19 states that will be sharing the remaining $8.2 million are California, Delaware, Florida, Hawaii, Idaho, Indiana, Maryland, Massachusetts, New Hampshire, New Jersey, New Mexico, New York, Oregon, South Dakota, Tennessee, Texas, Utah, Vermont and Wisconsin.

The four “high performance” states will receive a share of both the primary $8.2 million and the additional $2 million, resulting in grants as high as $1.275 million total for Texas.

Independent contractor misclassification continues to generate significant attention at the federal and state levels, as governments believe that they are losing substantial sums of money in lost tax revenues, failure to withhold, and failure to fully fund state unemployment and workers compensation systems. These grants signal a continuing and strengthening partnership between the DOL and state governments. Initiatives to detect and enforce worker misclassification are expected to continue to intensify.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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