Monday, January 26, 2015

U.S. DOL and WI DWD Join Forces to Combat Employer Misclassification

By:  Alan E. Seneczko  
 
Wisconsin employers that utilize independent contractors take note: The federal and state governments are now partnering to address the improper "misclassification" of employees as independent contractors, a development that could have a significant impact on employers who utilize the services of contractors.

 With very little fanfare (I wonder why...), on December 23, 2014 (very interesting date), the U.S. Department of Labor and Wisconsin Department of Workforce Development entered into a formal "Partnership Agreement," under which they agreed to "share resources" for the purpose of "enhancing enforcement" by "conducting coordinated investigations and sharing information." According to the Department of Labor's January 20, 2015 press release, the goal of the Agreement is to "protect the rights of employees by preventing their misclassification as independent contractors." Their partnership "represents a new effort on the part of 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."

 What this means is that if you are audited by the Wisconsin Unemployment Compensation Division and it finds that you have misclassified employees as independent contractors, the folks at the UC Division will share their findings with the federal Wage and Hour Division, which will want to ensure that you also paid overtime and properly compensated these contractors under the wage and hour laws. Same thing with the Wisconsin Worker's Compensation and Equal Rights Divisions. And, it works both ways. If the DOL finds that you misclassified your employees as contractors, it will notify its "partners" at the DWD of this fact, so that their wages can be included in your UC taxes and WC insurance premiums.

 The tests for independent contractor status applied by the various agencies all differ somewhat, but share many common elements. If you use independent contractors, it is imperative, now more than ever, that you ensure they will meet these tests. More information on worker misclassification can be found at http://dwd.wisconsin.gov/worker_classification, or by contacting Attorney Alan E. Seneczko at (262) 560-9696 or alseneczko@wesselssherman.com .