Alabama Teaming Up With Feds to Pursue Employers That Misclassify Independent Contractors
Author: Michael Cardman, XpertHR Legal Editor
October 7, 2014
Add Alabama to the growing list of states that are working with the federal government to go after employers that misclassify employees as independent contractors.
The Alabama Department of Labor on October 2 paired up with the US Department of Labor (DOL) to coordinate investigations, make referrals to one another, share data and take other actions to combat worker misclassification.
"Misclassification can create economic pressure for law-abiding business owners, who often find it difficult to compete with those who are skirting the law," the DOL said in a press release.
Alabama is the 16th state to join the DOL's Misclassification Initiative, following California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Utah and Washington.
The initiative was launched in 2011, when the DOL joined forces with the Internal Revenue Service to "share information to reduce the incidence of misclassification of employees, to help reduce the tax gap, and to improve compliance with federal labor laws."
In fiscal year 2013, DOL investigations resulted in the recovery of more than $83 million in back wages for more than 100,000 workers.
The DOL's enforcement data do not specify which of these enforcement actions resulted from its partnerships with state labor agencies. However, the amount of back wages recovered for minimum wage or overtime violations of the Fair Labor Standards Act resulting from independent contractor misclassification nearly doubled during the first two years of the initiative, so it is a reasonable assumption that the partnerships are not hurting the DOL's enforcement efforts.
The DOL is "actively pursuing" partnerships with other states.
An employer that misclassifies an employee as an independent contractor faces a variety of liabilities that can include the payment of back taxes plus interest, unpaid overtime and state workers' compensation premiums, plus the provision of health and welfare benefits.