The misclassification of employees as independent contractors has been a focal point of both federal and state labor law enforcement agencies during the Obama Administration. Since 2011, one part of this effort has involved fostering the relationships between the U.S. Department of Labor and other agencies at the federal and state levels to coordinate their efforts and share information. The Internal Revenue Service signed a memorandum of understanding (MOU) with the U.S. DOL in 2011 to work together to reduce the incidence of alleged misclassification and reduce the resulting tax gap. This was followed by announcement of a series of MOUs between the Labor Department and state labor law enforcement agencies.
On November 18, New York became the sixteenth state to join the U.S. DOL's Misclassification Initiative with the execution of MOUs by both the New York State Department of Labor and the Labor Bureau of the state's Office of the Attorney General. The Labor Bureau investigates and prosecutes alleged violations of state and federal labor laws. It has been particularly active under the incumbent state attorney general. The N.Y. DOL has enforcement authority for the New York Labor Law, and administers programs such as the federal-state unemployment insurance program.
The text of the MOUs makes the extent to which the federal and New York agencies actually will work together unclear as the respective five-page documents are replete with reservations of rights and other hedges against full-blown joint action. In describing their purposes the MOUs state that "the Agencies are forming this partnership to more effectively and efficiently communicate and cooperate on areas of common interest, to share training materials, to provide employers and employees with compliance assistance information, to conduct coordinated investigations and share information as appropriate towards the goal of protecting the wages, safety, and health of America's workforce."
The MOUs provide little greater specificity in addressing their possible implications for enforcement activities, noting that the agencies may conduct joint investigations "involving potential violations occurring within the State of New York, if opportunity provides." In addition, the MOUs state that the agencies will assist each other with enforcement and that they will make referrals of potential violations of each other's statutes.
The other states participating in the misclassification initiative are California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington. The targeting of independent contractors shows no signs of abating.
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