Labor Department asks states to help enforce wage and hour violations

The United States Labor Department is asking state governments and the Internal Revenue Service to help it enforce wage and hour violations across the country. To help enforce wage and hour violations, the Labor Department is creating information sharing agreements that will forward information on businesses in breach of wage and hour laws to all cooperating authorities. As of yet, Wisconsin has not indicated its participation.

The information sharing agreements will help the Labor Department and state governments target businesses that improperly classify workers as independent contractors instead of employees. Such misclassifications allow companies to avoid paying federal employee taxes, unemployment insurance and workers compensation.

In addition, the sharing of information will create a new incentive for employers to properly classify workers. The new incentive will be based on the threat of multiple fines coming from multiple authorities since each authority will be able to more easily assess violations thanks to information sharing. As said by the Labor Department’s top attorney, “There’s more of an incentive to be in compliance because the cost of what we consider to be illegal activity has increased.”

Before the information sharing agreements, companies in the wrong may have gotten away with paying a single fine. Under the new agreements, the state can share the information with the Labor Department which can assess its own fines and penalties. The IRS can also get into the mix by asking for back taxes.

States that have signed the information sharing agreements include Minnesota, Missouri, Connecticut, Hawaii, Maryland, Massachusetts, Washington, Utah and Montana. Illinois and New York plan to sign the agreements. It is not clear whether the state of Wisconsin plans to participate in the information sharing arrangement.

Source: Bloomberg Businessweek, “Labor Dept. expands enforcement of wage violations,” Sam Hananel, Sept. 19, 2011

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