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California has become the twelfth state to partner with the U.S.
Department of Labor ("DOL") to combat worker
misclassification. As previously reported in
September 2011, the DOL and the Internal Revenue Service
("IRS") signed a Memorandum of Understanding
("MOU") to coordinate efforts to stop businesses from
misclassifying employees as independent contractors. Under
the MOU, the DOL and IRS agreed to work together to share
information to reduce the incidence of employee
misclassification. Following the DOL's announcement,
eleven states, including Colorado, Connecticut, Hawaii, Illinois,
Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and
Washington, signed similar agreements with the DOL's Wage and
Hour Division. California is the most recent state to join in
the effort and enter into an agreement with the DOL. One of
the principal goals of this agreement, like those entered into with
other states, is to share resources to enhance enforcement by
conducting joint investigations. This recent development is
the latest in California's efforts to crack down on employee
misclassification, following the enactment of SB 459, which imposes
steep penalties for an employer's willful
misclassification.
Because of the increased efforts by the DOL and state
governments concerning employee misclassification, it is important
now more than ever for employers to carefully analyze their
classification of independent contractors.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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