The IRS and the Department of Labor (DOL) signed a memorandum of understanding (MOU) on September 19, pledging to work together to curb employee misclassification. Several states also signed agreements with the DOL on identifying worker misclassification issues.
Misclassification
The economic slowdown has exacerbated worker misclassification, an official from Connecticut said. By misclassifying employees as independent contractors, employers can circumvent fair labor standards, health and safety protections, and unemployment and workers’ compensation benefits, DOL Secretary Hilda Solis noted. “Proper worker classification should not be viewed as anti-business,” the Connecticut official added.
Working Together
“The DOL cannot stop misclassification on its own,” Solis said during a conference call with reporters. The MOU enhances the existing partnership between the IRS and the DOL, IRS Commissioner Douglas H. Shulman added.
Shulman explained that the Service is not beginning a new initiative; rather, the IRS and the DOL will share best practices and information. “In this new phase of our relationship, we will work together more efficiently to address worker misclassification issues, and better serve the needs of small businesses and employees,” Shulman said. Teams from the IRS and the DOL will meet regularly to share information, he added.
CCH Comment. Under current law, the IRS cannot issue guidance addressing worker classification. President Obama has proposed to permit the IRS to issue generally applicable guidance about the proper classification of workers and to allow the IRS to require prospective reclassification of workers who are currently misclassified.
State MOUs
The states signing MOUs with the DOL are: Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah, and Washington. Hawaii, Illinois, Montana, and New York are also expected to sign MOUs with the DOL, the department reported on its website.
By George L. Yaksick, Jr., CCH News Staff