The Obama Administration’s fiscal 2011 budget earmarks $25 million for a joint project by the Department of Labor (DOL) and Internal Revenue Service (IRS) to ferret out employers who abuse the tax code and the Fair Labor Standards Act (FLSA) by misclassifying as independent contractors those who actually qualify as employees.

One of the tests to determine if an independent contractor should actually be treated as an employee involves, well, independence–is the person working independently without much supervision or is s/he simply functioning as someone’s supernumerary or assistant?

At stake, of course, is not only the payment of taxes and Social Security/Medicare contributions by the employer, but also potential overtime wages and benefits for the employee. So the investigation should be of no small concern to any firm that uses (or abuses) the independent contractor classification.

Personnel Concepts publishes a variety of useful tools for adhering to the FLSA. Check out our Human Resources Tools section for a complete listing and purview.