US Department of Labor, IRS renew agreement to continue, improve joint effort to combat employee misclassification

WASHINGTON – The U.S. Department of Labor and the IRS today renewed a memorandum of understanding and added a streamlined process for joint referrals and closer coordination to stop businesses from misclassifying workers and denying them their full wages, benefits and protections under the law.

The updated MOU will also help the department’s Wage and Hour Division share information and work in concert with the IRS to strengthen enforcement of federal and state laws that protect workers’ rights. 

“We are determined to identify and resolve labor violations by employers who benefit by misclassifying employees as independent contractors and deprive them of the protections of the labor standards laws we enforce,” said Principal Deputy Wage and Hour Administrator Jessica Looman. “Renewing our memorandum of understanding with the IRS strengthens our existing partnership by improving referral processes and information sharing to help us better serve the nation’s workers.” 

In 2011, the Wage and Hour division and the IRS first entered into a memorandum of understanding to enable both agencies to use their resources to promote employer compliance with obligations to pay employees and related employment taxes. Since then, the division and IRS have shared information when an investigation discovered that an employer had misclassified employees. By sharing information, the agencies reduce the illegal use of misclassification and the tax gap while improving compliance with federal labor laws. 

Learn more about the Wage and Hour Division, including misclassification of independent contractors and a search tool for workers to use if they think you may be owed back wages collected by the division. Workers can call the Wage and Hour Division confidentially with questions – regardless of where they are from – and the department can speak with callers in more than 200 languages.