US Labor Department, Louisiana Workforce Commission sign agreement to reduce misclassification of employees as independent contractors

WASHINGTON — Nancy J. Leppink, deputy administrator of the U.S. Department of Labor's Wage and Hour Division, and Louisiana Workforce Commission Executive Director Curt Eysink signed a memorandum of understanding Feb. 23 regarding the improper classification of employees as independent contractors. This partnership is the 13th of its kind for the U.S. Department of Labor.

"This memorandum of understanding helps us send a message: We're standing united to end the practice of misclassifying employees," said Leppink. "This is an important step toward making sure that the American dream is still available for employees and responsible employers alike."

"Initiatives like this are critical in leveling the playing field for businesses that play by the rules," Eysink said. "They're also vital for ensuring that eligible, hardworking men and women get the coverage and benefits they earn if they are injured on the job or lose their jobs through no fault of their own."

Employee misclassification is a growing problem. In 2011, the Wage and Hour Division collected more than $5 million in back wages for minimum wage and overtime violations under the Fair Labor Standards Act that resulted from employees being misclassified as independent contractors or otherwise not treated as employees.

Business models that attempt to change, obscure or eliminate the employment relationship are not inherently illegal, unless they are used to evade compliance with federal labor law. The misclassification of employees as something else, such as independent contractors, presents a serious problem because these employees often are denied access to critical benefits and protections — such as family and medical leave, overtime compensation, minimum wage pay and Unemployment Insurance — to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often find it difficult to compete with those who are skirting the law.Employee misclassification also generates substantial losses for state Unemployment Insurance and workers' compensation funds.

Memorandums of understanding with state government agencies arose as part of the U.S. Department of Labor's Misclassification Initiative, which was launched under the auspices of Vice President Biden's Middle Class Task Force with the goal of preventing, detecting and remedying employee misclassification. California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington have signed similar agreements. More information is available on the U.S. Department of Labor's misclassification Web page at http://www.dol.gov/misclassification.

The mission of the U.S. Department of Labor is to foster, promote and develop the welfare of the wage earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and ensure work-related benefits and rights. To learn more about the FLSA's requirements, call the Wage and Hour Division's toll-free hotline at 866-4US-WAGE (487-9243) or visit its website at http://www.dol.gov/whd/.