Connecticut Employment Law Blog Insight on Labor & Employment Developments for Connecticut Businesses

Connecticut Part of New Governmental Pact on Employee Misclassificiation

Posted in Highlight, Laws and Regulations, Wage & Hour

With all the publicity about paid sick leave (effective January 1, 2012 — you’re ready, right?), it’s important not to forget that there are plenty of other employment laws that employers have to consider.

Photo Courtesy Library of Congress

Over the last few years, there’s been more agency enforcement centered around employee misclassification — that is treating “real” employees as independent contractors.  Why is this important to state and federal governments? In part, because governments lose out on tax revenue, when wages are properly reported.

Last month, the IRS and the U.S. Department of Labor signed a Memorandum of Understanding that will improve the DOL’s “efforts to end the business practice of misclassifying employees in order to avoid providing employment protections.”  You can read the memo here.  There are plenty of summaries of this memo already out there.

Of importance to employers in Connecticut though is a lesser-known announcement that Connecticut was one of seven states to have 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.

According to a press release posted on the Connecticut Department of Labor’s website, “The memorandums of understanding will enable the U.S. Department of Labor to share information and coordinate law enforcement with the IRS and participating states in order to level the playing field for law-abiding employers and ensure that employees receive the protections to which they are entitled under federal and state law.”

What Are The Implications for Employers?

Well, outside of the obvious one — namely, that employers should continue to evaluate their usage of independent contractors — the other big implication of this announcement is that employers should now assume that any Labor Department audits could be referred to the tax authorities for further investigation and followup. 

Combined with Connecticut’s new Joint Enforcement Commission on Worker Misclassification, these types of arrangements should make it clear that misclassification issues are at the top of agency enforcement agendas.