The Pennsylvania Department of Labor and Industry recently signed a three-year memorandum of understanding (MOU) with the U.S. Department of Labor’s (DOL) Wage and Hour Division designed to prevent employees from being misclassified as independent contractors and other wage-and-hour violations. The MOU, available on the DOL’s website, outlines the following collaborative enforcement activities between the two agencies: (a) joint investigations in the Commonwealth of Pennsylvania; (b) coordination and assistance regarding enforcement activities within the Commonwealth; and (c) “referrals of potential violations of each other’s statutes.”

Pennsylvania is now the 32nd state to enter into an MOU with the DOL. The other states are: Alabama, Alaska, Arkansas, California, Colorado, Connecticut, Florida, Hawaii, Idaho, Illinois, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New Mexico, New York, Oregon, Rhode Island, South Dakota, Texas, Utah, Vermont, Virginia, Washington, Wisconsin, and Wyoming.

The DOL believes these collaborations are “making a difference,” citing more than $74 million in back wages collected for over 102,000 workers in fiscal year 2015 alone. To support the MOU, the Pennsylvania Department of Labor and Industry announced on August 4, 2016 that it would launch a statewide misclassified workers public awareness campaign, which will begin in the fall of 2016.

Coupling Pennsylvania’s awareness campaign with the new federal overtime threshold regulations, which will go into effect on December 1, 2016, could lead to wage-and-hour headaches for Pennsylvania employers. Any company with employees in Pennsylvania should expect heightened scrutiny over misclassification issues beginning this fall and lasting well into 2017. In addition, Pennsylvania employers should expect misclassification investigations to include both state and federal agencies. To avoid these costly and time-consuming investigations, employers that do business in Pennsylvania (or states with similar agreements) should look carefully at all of the workers they have classified as exempt from overtime and/or as independent contractors, and evaluate whether the classification is appropriate.