DOL, California Enter into Agreement on Combatting Worker Misclassification

Nancy J. Leppink, deputy administrator of the U.S. Department of Labor's Wage and Hour Division (WHD), and California Secretary of Labor Marty Morgenstern have entered into a memorandum of understanding regarding the improper classification of employees as independent contractors. Leppink and California Labor Commissioner Julie A. Su hosted a press teleconference Feb. 9 during which they discussed how the U.S. Department of Labor and the state of California will embark on new efforts, guided by this memorandum, to protect the rights of employees and level the playing field for responsible employers by reducing the practice conducted by some businesses of misclassifying employees. This partnership is the 12th of its kind for the Department of Labor (DOL).

"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 Leppink. "This is an important step toward making sure that the American dream is still available for workers and responsible employers alike."

"California is proud to enter into this partnership with the U.S. Department of Labor to work together to attack the problems of the underground economy," said Su. "Gov. Brown just signed an important law that went into effect on Jan. 1, increasing penalties for willful misclassification. With the Labor Department, we are poised to use all the tools in our arsenal to lift the floor for hardworking employers and employees throughout the state."

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 classification 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, the DOL explains. 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.

Memorandums of understanding with state government agencies arose as part of the U.S. Department of Labor's Misclassification Initiative, which was launched under the auspices of Vice President Biden's Middle Class Task Force with the goal of preventing, detecting and remedying employee misclassification. Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington have signed similar agreements.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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