From JDSupra Business Advisor — Keith Kopplin of Ogletree, Deakins, Nash, Smoak & Stewart, P.C. reports that the United States Department of Labor (DOL) announced that Wisconsin is the latest state to sign an agreement and join the DOL’s misclassification initiative. Other states include Alabama, California, Colorado, Connecticut, Florida, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New York, Utah and Washington. The DOL describes the iniative as “a new effort on the part the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. Keith writes:
“Wisconsin is the 19th state to sign a Memorandum of Understanding (MOU) with the DOL for the purpose of sharing information and coordinating enforcement regarding employee classification. The MOU between the DOL’s Wage and Hour Division and Wisconsin’s Department of Workforce Development has an initial term of three years.
Workers that do not have the employment status “employee” are not eligible for minimum wage and overtime compensation, job-protected leave pursuant to the federal Family and Medical Leave Act, workers’ compensation benefits, and unemployment insurance benefits, among a number of other rights and benefits under law. In addition, employers engaging independent contractors, as opposed to employees, are not required to pay certain taxes, thereby depriving the government of revenue.
To combat the tax implications associated with misclassification, the Internal Revenue Service (IRS) launched the Voluntary Classification Settlement Program (VCSP), which is a “voluntary program that provides an opportunity for taxpayers to reclassify their workers as employees for employment tax purposes for future tax periods with partial relief from federal employment taxes.” While the VCSP may provide tax relief, it is important to note that the IRS also entered into a MOU with the DOL, the purpose of which is to share information and collaborate in order to “reduce the incidence of misclassification of employees as independent contractors, help reduce the tax gap, and improve compliance with federal labor laws.” The IRS has indicated that it will not share information regarding the VCSP with the DOL, but employers should consider this possibility when evaluating whether to participate in the program…”