In recent years, a growing number of employers have taken part in the deceptive practice of improperly classifying their workers as independent contractors. Through this illegal practice, business owners try to save money at their workers' expense.
Misclassifying workers allows employers to avoid expenses such as payroll taxes, workers' compensation, disability and Social Security. It also subverts many of the legal protections that are otherwise available to employees, such as minimum wage and overtime laws and mandatory rest breaks.
Last year, the Department of Labor collected nearly $4 million in back wages on behalf of about 6,500 misclassified employees - approximately four times the amount collected in 2008. This problem, often referred to as "wage theft," is especially prevalent in the hotel and restaurant industries, as well as among health care, janitorial and day care businesses. Despite the popularity of these tactics among unscrupulous business owners, employee misclassification and wage violations are an unjustified violation of worker's rights.
Recently, the Department of Labor and the Internal Revenue Service have initiated a program aimed at cracking down on these businesses by sharing information among state and federal agencies. States can voluntarily agree to participate in the program, thereby subjecting noncompliant employers in the state to federal fines and penalties in addition to any applicable state fines. By increasing the cost of illegal employment practices, the program aims to improve compliance in participating states.
Participating States
So far, nine states are already participating in the program. The states are Connecticut, Hawaii, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington. In addition, New York and Illinois have announced their plans to participate. Although California is not currently involved in the federal data-sharing program, employers in the state will likely feel the effects of enhanced scrutiny from federal agencies anyway. To help increase the focus on this issue nationwide, the Department of Labor has recently hired an additional 300 employees to investigate wage theft complaints.
