Peter J. Richter
February 12, 2015
On January 20, 2015, the United States Department of Labor (“DOL”) announced that it had entered into a memorandum of understanding (the “Memorandum”) with the Wisconsin Department of Workforce Development (“DWD”). The stated goal of the Memorandum is to prevent the misclassification of employees as independent contractors. The issue is of particular importance to the government because, among other things, payments to independent contractors are not covered by wage and hour laws and may also avoid employer contributions for FICA and FUTA.
Businesses have long used independent contractors to perform services that could be performed by traditional employees. While a business may seek to create an independent contractor relationship for a variety of reasons, there are many factors that go into determining whether or not a true independent contractor relationship exists. The distinction between an employee and an independent contractor is vitally important to both the employer and the worker. Specifically, an employer who incorrectly treats a worker as an independent contractor may subject itself to significant legal liability. On the other hand, an employee who is classified as an independent contractor may miss out on a number of rights and benefits.
The Memorandum documents a partnership between the DOL and the DWD to address the issue of misclassified employees. The DWD includes oversight and administration of the Unemployment Insurance Division, the Equal Rights Division, and the Workers Compensation Division. Those departments collect information (and in some cases employment related taxes, fees, etc.) from employers and employees in the State of Wisconsin. According to the Memorandum, the DOL and the DWD partnership will aid in the enforcement of the independent contractor standards under state and federal law because “[t]he agencies will make referrals of potential violations of each other’s statutes” and “coordinate their respective enforcement activities and assist each other with enforcement.” Accordingly, any business that uses workers who are treated as independent contractors should carefully review those working relationships to ensure that all the key standards and requirements are satisfied, or can be satisfied. A misstep could lead to a call from the DOL and the DWD and result in some substantial liability for the business.
If you have any questions about how the information in this article may affect you or your business, please contact Peter Richter at email@example.com or (608) 257‑2281 or your Stroud attorney.
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