The Department of Labor has for the second year in a row awarded grants to states to attack worker misclassification. This year, ten million dollars ($10,000,000.00) has been awarded to 23 states. The Department states that these grants are to be used to “increase the ability of state unemployment insurance tax programs to identify instances where employers improperly classify employees as independent contractors or fail to report the wages paid to workers at all.” THE DOL continues to direct its resources to what it believes is “one of the most serious problems facing affected workers, employers and the entire economy.” The DOL states on their misclassification website “Employee misclassification generates substantial losses to the federal government and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds.” As I have explained many times to our clients and others, it is these “substantial losses” in tax revenues that I believe are the low-hanging fruit the agencies will go after.

All employers would do well in looking at the classifications of their workers, and limiting their relationships and uses of independent contractors. That being said, there are many times that independent contractor relationships exist without any issues.  This is just a reminder to make sure that you are comfortable with your classifications, because attacking employers with misclassification is an easier way to increase tax revenues than to get it passed through the voters.