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DOL and IRS Combine Forces to Combat Employee Misclassification

September 26, 2011

Our Costa Mesa, California employment lawyers have been following the recent announcement of a jointly signed memorandum of understanding by the U.S. Department of Labor and the IRS, that aims to combine departmental efforts to eliminate the practice of employee misclassification in businesses across the country.

Agency leaders and labor commissioners from seven states also signed memorandums of understanding with the DOL's Wage and Hour division, including Maryland, Massachusetts, Utah, Missouri, Minnesota, Connecticut, and Washington. Hilda L. Solis, U.S. Secretary of Labor, also announced that the Wage and Hour Division of the DOL will enter into agreements with the state labor agencies of Illinois, Montana, and Hawaii, as well as New York State's attorney general.

According to the DOL press release, the memorandums of understanding will help the DOL to share information regarding employee misclassification with the IRS and participating states in order to coordinate law enforcement--making sure that employees are receiving their federal and state law employment protections, and to level the playing field for employers who follow state and federal employment laws.

As our Riverside employment lawyers blog has reported in a previous post, employment misclassification poses a serious threat to employees who have the legal right to employment that pays fairly and to honest employers who follow the guidelines of federal labor and employment rules and regulations--as employee misclassification cheats employees out of important employment benefits like minimum wage and overtime compensation, and gives dishonest employers who knowingly engage in employee misclassification an unfair competitive advantage.

Employee misclassification is the act of unknowingly or knowingly misclassifying employees as "exempt" from the Fair and Labor Standards Act (FLSA), either because of a lack of knowledge, or to intentionally reduce the cost of workers' compensation insurance, to avoid paying payroll taxes, minimum wage and overtime compensation, as well as unemployment or disability insurance, along with other wage and hour benefits under the Fair Labor Standards Act (FLSA), like providing rest breaks and meal periods--all benefits available to employees who are covered by the FLSA. The IRS has reported that the act of employee misclassification costs the U.S. Treasury over $1 billion per year.

Labor Secretary Solis stated that these agreements send a clear message that the DOL is committed to ending the practice of employee misclassification by taking partnership with the IRS and other states to work together in an efficient manner to address the issues of employee misclassification to better serve employees and the needs of small businesses and employers. As Labor Secretary under the Obama Administration, Solis has increased the enforcement staff in all of the agencies within in the Labor Department to help combat the growing problem of employee misclassification and wage and hour violations of the FLSA.

If an employee has been improperly classified in the workplace and has experienced violations of the Fair Labor Standards Act, or California Labor Codes violations in Costa Mesa, California or in cities within Orange County, contact our attorneys at Howard Law, PC today.

Labor secretary, IRS commissioner sign memorandum of understanding to improve agencies' coordination on employee misclassification compliance and education, U.S. Department of Labor Press Release, September 19, 2011

Related Web Resources:

The Department of Fair Employment and Housing (DFEH)

U.S. Department of Labor: Wage and Hour Division (WHD), Fair Labor Standards Act (FLSA)

Department of Labor (DOL): Wage and Hour Division (WHD)

Related Blog Posts:

Renal Advantage Sued in Employee Misclassification Lawsuit, California Employment Lawyers Blog, September 6, 2011

T. J. Maxx Retail Chain Sued For Employee Misclassification, California Employment Lawyers Blog, August 25, 2011

Employee Misclassification Leads to Nearly $1M in Back Pay for 30 Restaurant Workers, California Employment Lawyers Blog, August 24, 2011

DOL Forces Texas Company to Pay $433K in Back Wages For Employee Misclassification , California Employment Lawyers Blog, August 5, 2011

CA Drug Sales Reps Sue Novo Nordisk in Class Action Wage and Hour Lawsuit, California Employment Lawyers Blog, July 28, 2011

Aon Corp. Settles Employee Misclassification Lawsuit for $10.5M , California Employment Lawyers Blog, July 8, 2011

"White Collar" Exemptions under the FLSA, California Employment Lawyers Blog, November 12, 2010

U.S. Labor Department Launches "We Can Help" Campaign to Enforce Wage and Hour Laws, California Employment Lawyers Blog, April 2, 2010

"Exempt" vs. "Non-exempt" in the California Workplace, California Employment Lawyers Blog, April 15, 2010