The level of scrutiny placed on the ways in which employers classify those who work for them is likely to increase in the near future: “the Congressional budget includes $14 million to combat misclassification and recover unpaid taxes and $4 million for personnel at the DOL Wage and Hour Division to investigate misclassification.”
As previously discussed in this space, misclassification typically deals with one of three issues: (1) unpaid interns, (2) independent contractors, and (3) volunteers. The classic unpaid intern misclassification features an individual who, while classified as an unpaid intern, is being asked to handle the responsibilities of a full-time employee. This problem most commonly arises in the for-profit sector. Meanwhile, the classic independent contractor misclassification features workers who are termed independent contractors but get treated by employers in the same fashion an employee would. Volunteers are simply not permitted in the private sector. The problems are similar, though the details of what is necessary for compliance are distinct. Employers should take the time to review the rules for proper classification laid out in our previous blog posts.
The size of the budget allocated to combat misclassification issues should have employers reviewing their practices. It is clear that identifying alleged misclassifications will be a major focus of the DOL and your business could be in the cross-hairs. Government agencies feeling the economic pinch and determining that they have been denied taxes or other payroll benefits inapplicable to independent contractors, volunteers and unpaid interns, have every incentive to inspect worker classifications for compliance. In addition to whatever tactics such government agencies may have utilized in the past, employers should also be aware that there will be a greater deal of government interdepartmental communication on this issue. Strategy and tactics focused on becoming compliant now could be cost effective for employers in the long run.