Speaking before the American Bar Association (ABA) at its annual conference this month, Solicitor M. Patricia Smith of the Department of Labor (DOL) said that investigations of employment arrangements that incorrectly classify people as independent contractors, or otherwise make employees exempt from overtime pay, would continue in a cooperative effort with several states.

Smith, who as labor secretary for New York initiated what she called a coordinated wage-theft campaign to uncover overtime and worker misclassification abuse, told the lawyers that she is bringing the same cooperative spirit to the effort at the Department of Labor, inviting the sharing of information between federal and state agencies. Thus she has enlisted the departments of labor in 13 states to join the DOL in its ongoing independent contractor/overtime wage investigation.

As part of the effort, Smith said the DOL is also sharing the information it uncovers with the Internal Revenue Service (IRS). Businesses that misclassify employees as independent contractors, if detected during the DOL investigation, could face payment of back withholding taxes and penalties for those employees who were misclassified. These employers could also be on the hook for past-due benefits, vacation time and overtime pay.