Federal and State Inter-Agency Cooperation Announced to End Misclassification

The Department of Labor has signed a memorandum of understanding (“MOU”) with the Internal Revenue Service (“IRS”) that is intended to end the business practice of misclassifying employees as exempt from federal labor laws. In addition, agency leaders of Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah and Washington signed MOUs with the Department of Labor’s Wage and Hour Division. The Department of Labor also announced agreements to enter into MOUs with the state agencies of Hawaii, Illinois, and Montana, as well as the attorney general of New York. More after the break.

The MOUs will allow the Department of Labor to share information and coordinate efforts with the IRS and participating states to enforce laws prohibiting the misclassification of employees. The information sharing is intended to target businesses that improperly label workers as independent contractors or non-employees to avoid paying minimum wage, overtime pay, unemployment insurance, and federal taxes. The coordination efforts between federal and state agencies could subject businesses to multiple fines. Additionally, violations will be reported to the IRS, which may seek unpaid taxes from the business. These MOUs arose as part of the Department of Labor’s Misclassification Initiative, which was launched with the goal of preventing, detecting and remedying employee misclassification.

Additional information about the DOL’s recent MOUs can be located here:




To review one of our previous posts about possible cooperation among government agencies, click here.