On Monday, September 19, 2011, Secretary of Labor Hilda L. Solis signed a memorandum of understanding with the Internal Revenue Service (“IRS”) to improve the agencies’ coordination regarding the practice of misclassifying employees as independent contractors. In addition, representatives of Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington also entered into memorandums with the U.S. Department of Labor’s Wage and Hour Division that will enable the DOL to share information and coordinate law enforcement with those states.  

According to IRS Commissioner Doug Shulman, “This agreement takes the partnership between the IRS and Department of Labor to a new level. In this new phase of our relationship, we will work together more efficiently to address worker misclassification issues, and better serve the needs of small businesses and employers alike.” As we have reported in previous Updates, this continued formalization of the coordination efforts between the various state and federal agencies should be a warning to all employers that the federal and state governments are serious about the employee misclassification issue. Should you have any questions about whether your independent contractors are, in fact, employees, please be sure to consult with your relationship attorney.