Employee misclassification can be a problem for everyone involved. We’re talking problems for the employer, employee, state and federal government entities. These problems can lead to the denial of overtime compensation, unemployment, family and medical leave, etc… And this doesn’t even include those who misclassify employees on purpose to exempt the workers from the Fair Labor and Standards Act (Don’t do this).
Recently we’ve seen joint federal and state agreements becoming more prominent in the enforcement of accurate classifications. A total of 35 states currently have an agreement with the U.S. Department of Labor, creating a system for information sharing between the partners and making it easier for employers to access classification information. This is designed to assist both employers and workers in determining proper classification of employees as exempt or non-exempt in many common job titles. The U.S. DOL has had an agreement with the Illinois DOL since September 2011 and, more recently, entered into an agreement with the Illinois Office of the Attorney General.
The state and U.S. DOL have good reason to be interested in creating a better system. A study done by the U.S. DOL put the total percentage of workers misclassified by employers at 30% nationwide, in 2000. Another study, conducted by the University of Missouri – Kansas City, researched Illinois classifications between the years of 2001 through 2005 and found there to be 19.5% of employers who misclassify their workers, resulting in $ 97.9 million lost to worker’s compensation, and $124.7 million dollars of unpaid state income taxes. It goes without saying that the U.S. DOL probably wanted to reduce these numbers significantly.
Currently, the partnerships are doing well. The U.S. DOL has reported approximately $74 million dollars were paid in back wages as a result of the joint efforts. These figures are only expected to increase, so don’t be surprised when the DOL shakes hands with the last 15 states to join the initiative against misclassification.