California this month became the 12th state to enter into a memorandum of understanding (MOU) with the Department of Labor (DOL) to fight the widespread employer practice of misclassifying workers as independent contractors.
"This memorandum of understanding helps us send a message: We are standing together with the state of California to end the practice of misclassifying employees," said Nancy Leppink, deputy administrator of the DOL's Wage and Hour Division (WHD). "This is an important step toward making sure that the American dream is still available for workers and responsible employers alike."
In 2011, the WHD collected more than $5 million in back wages for minimum wage and overtime violations under the Fair Labor Standards Act (FLSA) that resulted from employees being misclassified as independent contractors or otherwise not treated as employees.
The WHD explained the basis of its campaign in this way:
The misclassification of employees as something else, such as independent contractors, presents a serious problem, as these employees often are denied access to critical benefits and protections — such as family and medical leave, overtime compensation, minimum wage pay and Unemployment Insurance — to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often struggle to compete with those who are skirting the law.Employee misclassification also generates substantial losses for state Unemployment Insurance and workers' compensation funds.