Ferrara Fiorenza P.C.

Worker Misclassification: Stakes Raised Again

Employers should take special note that the enforcement efforts designed to find violations for misclassifying an employee as an independent contractor have been substantially increased. 

On September 19, 2011, the U.S. Department of Labor (DOL) announced that it had signed a memorandum of understanding (MOU) with the Internal Revenue Service that will enable them to share information and coordinate enforcement activities against employers accused of misclassifying employees as independent contractors.  

According to the DOL press release concerning this alliance, the MOU will “improve departmental efforts to end the business practice of misclassifying employees in order to avoid providing employment protections.” As the IRS's involvement suggests, this alliance has as much -- if not more -- to do with enhancing tax and other government revenues as it does with "employee protections". 

Labor Secretary Hilda Solis also announced that the DOL would enter into similar MOU’s with state authorities in Connecticut, Massachusetts and New York, among other states.  The bottom line is that employers who use independent contractors will face multi-pronged scrutiny and enforcement proceedings, from the DOL, the IRS, and various state agencies. 

In light of this development, every company that uses independent contractors should anticipate renewed enforcement energy, activity, and aggressiveness. Company owners should work with their attorneys to immediately evaluate their vulnerability to a successful claim that those workers are improperly classified. Employers found to be in violation may face steep penalties for both labor law and tax-related violations. 

If you have any questions or need assistance in assessing your vulnerability in this regard, please do not hesitate to contact us at 315-437-7600.


Excerpted from the October 2011 "Employment Law Matters".  To see the entire newsletter, please click here.