2013 budget approves special funding for the DOL to “Detect and Deter” the misclassification of workers as independent contractors

Arnstein & Lehr attorney Lori Adelson

Lori Adelson

On February 13, 2012, President Obama announced The Fiscal Year 2013 Budget. Notably, the 2013 Budget once again includes special funding for the Department of Labor to “detect and deter” companies from misclassifying employees as independent contractors. Specifically, 14 million is budgeted for misclassification, including $10 million for grants to States to identify misclassification and recover unpaid taxes, and $4 million for DOL personnel to investigate misclassification.

The DOL separately released its 2013 Budget, on the same day. To combat what it refers to as “the problem of misclassification, the DOL allocates its funding toward the hiring of an additional 35 full-time investigators “as part of an initiative to detect and deter the inappropriate misclassification of employees as independent contractors and strengthen and coordinate Federal and State efforts to enforce labor violations arising from misclassification.” The DOL says it will maintain an “increased presence in those industries where the misclassification of employees as independent contractors is prevalent.

The federal misclassification initiative continues into 2013 and beyond. The allocation of additional staffing to “detect and deter” is likely to translate into more investigations of business models that the DOL regard as contrived or designed to circumvent the wage and hour, overtime, safety and other laws affording employees the protections of federal law. Thus, businesses, now more than ever, need to take steps to ensure their independent contractor compliance.

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