According to a September 15 press release from the U.S. Department of Labor, the DOL has awarded grants totaling $10.2 million to 19 states to help fund their efforts to crack down on misclassified workers.
States receiving the funds include California, Delaware, Florida, Hawaii, Idaho, Indiana, Maryland, Massachusetts, New Hampshire, New Jersey, New Mexico, New York, Oregon, South Dakota, Tennessee, Texas, Utah, Vermont, and Wisconsin. According to the release, the funds will be used by the states’ Unemployment Insurance tax programs to identify instances where employers improperly classify employees as independent contractors or fail to report the wages paid to workers at all.
In addition, four states (Maryland, New Jersey, Texas, and Utah) will receive “high performance bonus” funds totaling $2 million, thanks to their “high performance or most improved performance” in detecting incidents of worker misclassification.
This accompanies increased IRS scrutiny of companies that use independent contractors, to ensure those workers are truly treated as “independent,” and aren’t actually employees. There have also been several high-profile cases lately of employers having to shell out big bucks for misclassification of workers, most notably FedEx drivers in California — a case which could end up costing the company hundreds of millions of dollars.
If you’re considering hiring workers you plan to classify as independent contractors, you should know both the US DOL and your state labor board will be looking over your shoulder. It’s sometimes tricky to decide whether a worker is truly independent or if they’re an employee. Prudent employers will consult with their employment law advisor to ensure they’re meeting all the necessary criteria to classify workers as “independent” lest they find themselves in hot water.
Forewarned, as they say, is forearmed.