• 28
  • September
    2011

Each state, including California, has laws that govern how, when, where and how much employees should be paid based on their classification under statute. When an employer fails to follow the letter of the law, it is considered a wage and hour violation.

The federal government also has its own regulations to govern how employees should be paid, and the United States Labor Department has made it clear that they are going after employers that have taken advantage of their workers through employee misclassifications.

The Labor Department has already joined with at least nine states, two have promised to join in the near future and no state who wishes to participate would be turned down. The cooperative effort is an information sharing effort that includes the 11 states, the Labor Department and the Internal Revenue Service.

The goal of the cooperative is to crack down on the businesses that have intentionally mislabeled their employees. Instead of calling them employees, they label them as independent contractors in order to skirt minimum wage and overtime requirements. The businesses get to double dip in the profits that they make on the scheme by avoiding having to pay unemployment insurance, workers' compensation and other federal taxes associated with a full-time employee.

The agreements provide an avenue to increase the number of fines levied against the violating employers. In most instances, the corporation pays only one find to a state agency, but under the agreement, the Labor Department would be notified of any violations and be able to institute secondary fines and penalties. The trail of information would not end there; the next step in the line is the IRS who have the authority to then seek unpaid taxes based on the labor violations.

Source: The Wall Street Journal, "Labor Dept. expands enforcement of wage violations," Sept. 19, 2011