The U.S. Department of Labor (DOL) recently signed a (MOU) with the Internal Revenue Service (IRS) that is aimed at improving departmental efforts to end the misclassification of workers as independent contractors. The MOU will enable DOL to share information and coordinate law enforcement with the IRS in what DOL says will “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.”
In addition, state labor commissioners and other agency leaders representing Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah, and Washington have also signed MOUs with DOL’s Wage and Hour Division and, in some cases, DOL’s Employee Benefits Security Administration, Occupational Safety and Health Administration, Office of Federal Contract Compliance Programs and Office of the Solicitor. DOL also announced plans for MOUs with the state labor agencies of Hawaii, Illinois and Montana, as well as with New York’s attorney general.
These agreements were established as a part of DOL’s Misclassification Initiative aimed at restricting the lack of access to various employee benefits and protections to which workers may be entitled as regular employees, but not as independent contractors, while simultaneously curbing the losses of Social Security, Medicare and unemployment insurance taxes that employers are required to pay for employees.
As a result of the initiative, employers are urged to conduct self-audits to evaluate the level of vulnerability should a worker or the government claim a worker’s status as an employee instead of an independent contractor. Questions to consider include, but are not limited to, whether or not:
- the worker’s services are an integral part of the organization’s activities;
- the worker has a significant investment in facilities or equipment;
- the worker has an opportunity for profit or loss in a business sense;
- the worker exercises the initiative, judgment and foresight of a business owner;
- the working relationship is permanent or indefinite, rather than for a pre-determined time; and
- the worker has meaningful control over the details of the work.