Florida and DOL Sign Pact to Target Independent Contractor Misclassification

In January 2015, Florida became the 19th state to join the United States Department of Labor’s Misclassification Initiative with the execution of a memorandum of understanding (MOU) by Florida’s Department of Revenue. Misclassification of workers as independent contractors has been a key initiative of the Department of Labor since 2011 when it signed an MOU with the Internal Revenue Service to work together to reduce worker misclassification, level the playing field for responsible employers, and reduce the tax gap (maybe not in this order). This was followed by a succession of MOUs between the Department of Labor and state labor departments.

The recent MOU with Florida recognizes that the Department of Labor enforces a wide range of federal labor laws dealing with wage and hour issues and that Florida’s Department of Revenue is responsible for ensuring that employers correctly report all of their employees and wages. Now, the departments will refer complaints to each other, conduct joint investigations, and share information regarding settlements and disposition. This may mean that an investigation that begins in response to a claim for state reemployment assistance by a worker who was never reported as an employee, will trigger a referral to the Department of Labor for failure to pay overtime wages required by federal law (which can lead to personal liability for business owners and managers).

Reliance on independent contractors rather than employees is not inherently unlawful. However, the determination of whether a worker qualifies as an independent contractor under federal and state law is based on a factual analysis of the particular situation. There is no easy mechanical answer. Given the current targeting of independent contractors and the expected increase in investigations and related litigation, employers should reassess their independent contractor relationships to ensure they are consistent with state and federal laws.