Do you know a business that employs independent contractors as a way to avoid paying wages, benefits, and taxes?

Hawaii and 10 other states have joined the U.S. Department of Labor and the IRS in an effort to end the practice of misclassifying employees as independent contractors. Under the new agreement signed September 19, 2011, the Labor Department can share information about violations and fines with the IRS and participating states. By coordinating their efforts, these agencies will work together to investigate and pursue businesses that intentionally misclassify workers in order to sidestep legally required wages, benefits, and taxes.

What are the potential consequences?
Paying workers as independent contractors when they should be treated as employees is rarely an isolated issue. Oftentimes, when a business is found to have misclassified workers, several other violations are also uncovered. In addition to owing back pay, back benefits, back taxes and penalties, such businesses may also find themselves open to third-party and class-action lawsuits.

What should you do?
If your business employs independent contractors, review your IC agreements and re-visit your working relationships to make sure they meet federal and state requirements.

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The Department of Labor press release on its recently announced joint effort with Hawaii and other states is available here:
http://www.dol.gov/opa/media/press/whd/WHD20111373.htm