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3 years ago

DOL and IRS Coordinate on Employee Misclassification

DOL and IRS Coordinate on Employee Misclassification

DOL and IRS Coordinate on Employee

ong>DOLong> ong>andong> ong>IRSong> ong>Coordinateong> on Employee MisclassificationOn Sept. 19, 2011, Secretary of Labor Hilda Solis ong>andong> ong>IRSong> Commissioner Doug Shulman signed a memorong>andong>um ofunderstong>andong>ing between the Department of Labor (ong>DOLong>) ong>andong> the Internal Revenue Service (ong>IRSong>) to improve theagencies’ coordination on employee misclassification compliance ong>andong> education. Eleven state agency leaders alsosupported the initiative ong>andong> signed a memorong>andong>um with the ong>DOLong>.This Brown & Brown Consulting Regulatory Update provides a brief overview of what this memorong>andong>um ofunderstong>andong>ing entails.Involved Agencies ong>andong> StatesThe memorong>andong>um of understong>andong>ing between the ong>DOLong> ong>andong> the ong>IRSong> is intended to improve agency efforts to end thebusiness practice of misclassifying employees. Employers will sometimes misclassify employees as independentcontractors in order to avoid providing employment protections ong>andong> benefits.The signatory states are Connecticut, Marylong>andong>, Massachusetts, Minnesota, Missouri, Utah ong>andong> Washington.Secretary Solis also announced agreements for the Wage ong>andong> Hour Division to enter into memorong>andong>ums ofunderstong>andong>ing with the state labor agencies of Hawaii, Illinois ong>andong> Montana, as well as with New York's attorneygeneral.Origin of the Memorong>andong>um of Understong>andong>ingThese memorong>andong>ums of understong>andong>ing arose as part of the ong>DOLong>’s Misclassification Initiative, which is intended toprevent, detect ong>andong> remedy employee misclassification.When an employee is misclassified as an independent contractor, he or she will be denied the protection of severalkey federal labor ong>andong> employment laws. Some of the key laws designed to protect workers that only apply to“employees” include the following:• Fair Labor Stong>andong>ards Act— establishes minimum wage, overtime, ong>andong> child labor stong>andong>ards;• Family ong>andong> Medical Leave Act— requires employers to allow employees to take up to 12 weeks of unpaid,job-protected leave for medical reasons related to a family member’s or the employee’s own health;• Occupational Safety ong>andong> Health Act— requires employers to maintain a safe ong>andong> healthy workplace fortheir employees ong>andong> requires employers ong>andong> employees to comply with all federal occupational health ong>andong>safety stong>andong>ards;1

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