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Labor Dept., IRS to Crack Down on Misclassifying Employees

Photo: Peter Baxter

The Labor Department has signed agreements with the Internal Revenue Service and nine states in an effort to crack down on the business practice of misclassifying employees to avoid paying benefits and taxes.

According to a release issued Monday, the Labor Department will share information and coordinate law enforcement with the IRS and participating states.

Misclassifying workers lets companies avoid paying benefits such as overtime, workers compensation and unemployment insurance. The practice also helps businesses avoid paying federal taxes.

“We’re here today to sign a series of agreements that together send a coordinated message: We’re standing united to end the practice of misclassifying employees,” said Labor Secretary Hilda Solis.

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