US Labor Department, California sign agreement to reduce independent contractor misclassification

By: Sam G. Sherman, Esq.

On February 9, 2012, the U.S. Department of Labor and California’s secretary of labor entered into a memorandum of understanding regarding the misclassification of employees as independent contractors. The goal is to continue to target, and eliminate, employee misclassification. The press release can be found here.

At this point, it is unclear how the memorandum of understanding will impact employers. The press release merely indicates that the two agencies will “embark on new efforts” to prevent misclassification, but does not hint at what those new efforts will involve.

Ultimately, the issue remains the same–avoid misclassifying workers as independent contractors. It can lead to civil penalties, back taxes, back wages (including overtime pay and damages for missed breaks), and unemployment insurance. It is always a good idea to retain an employment attorney to audit the relationship with the independent contractor to determine if an employment relationship exists.

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