Louisiana Workforce Commission Executive Director Curt Eysink and Nancy J. Leppink, deputy administrator of the U.S. Department of Labor’s Wage and Hour Division, signed a memorandum of understanding today to clamp down on the practice of employers misclassifying employees as independent contractors to avoid providing employment protections.
The memorandum of understanding, along with similar agreements with 12 other states and the Internal Revenue Service, will enable to the U.S. Department of Labor to share information and coordinate law enforcement with Louisiana.
“Initiatives like this are critical in leveling the playing field for businesses that play by the rules,” Eysink said. “They're also vital for ensuring that eligible, hard-working men and women get the coverage and benefits they earn if they are injured on the job or lose their job through no fault of their own.”
“This memorandum of understanding helps us send a message: We’re standing united to end the practice of misclassifying employees,” Leppink said. “This is an important step toward making sure that the American dream is still available for employees and responsible employers alike.”
Employee misclassification is a growing problem. In 2010, the Wage and Hour Division collected nearly $4 million in back wages from minimum wage and overtime violations under the Fair Labor Standards Act that resulted from employees being misclassified as independent contractors or otherwise not treated as employees.
Business models that attempt to change, obscure or eliminate the employment relationship are not inherently illegal, unless they are used to evade compliance with federal labor law. The misclassification of employees as something else, such as independent contractors, presents a serious problem, as these employees often are denied access to critical benefits and protections—such as family and medical leave, overtime compensation, minimum wage pay and Unemployment Insurance—to which they are entitled.
In addition, misclassification can create economic pressure for law-abiding business owners, who often find it difficult to compete with those who are skirting the law. Employee misclassification also generates substantial losses for state Unemployment Insurance and workers’ compensation funds.
Memorandums of understanding with state governments arose as part of the U.S. Department of Labor’s Misclassification Initiative, which was launched under the auspices of Vice President Biden’s Middle Class Task Force with the goal of preventing, detecting and remedying employee misclassification. California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington have signed similar agreements. More information is available at http://www.dol.gov/misclassification.
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