On Sept. 19, the U.S. Department of Labor announced that it has entered into a cooperative alliance, with the U.S. Internal Revenue Service and other government agencies, aimed at cracking down on employers that misclassify workers as independent contractors when those workers should be classified as employees.

The DOL announcement revealed that labor commissioners and other agency leaders representing seven states signed memorandums of understanding with the department’s Wage and Hour Division and, in some cases, its Employee Benefits Security Administration, Occupational Safety and Health Administration, Office of Federal Contract Compliance Programs, and Office of the Solicitor.

The signatory states are Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah, and Washington.

DOL also announced that it approved agreements for the Wage and Hour Division to enter into memorandums of understanding with the state labor agencies of Hawaii, Illinois, and Montana, and with New York’s attorney general.

Federal and state government agencies are increasingly focusing on worker misclassification, through such methods as performing on-site audits of companies, to determine whether workers are properly classified as independent contractors.

If a worker is an employee, the employer must pay federal and state unemployment taxes, its share of Social Security and Medicare taxes, and must withhold the employee’s share of federal income and Federal Insurance Contributions Act taxes. The employer may also incur costs related to pensions, health insurance, vacation pay, sick pay, and workers’ compensation insurance. In addition, employers face federal and state regulations regarding working conditions and overtime.

The rules governing worker classification are complex and, at times, have led to confusion about how temporary or contract workers should be classified. Economic conditions have increased pressure on staffing firms and clients to consider classifying temporary or contract workers as independent contractors. Staffing firms considering that option should first make sure they are complying with federal and state law.

For more information about the legal issues staffing firms face when classifying their employees, please contact Masiello Employment Services, Inc.

Written by Anne Duffy – Provided by American Staffing Association