In a U.S. Department of Labor administrator interpretation dated July 15, 2015, the DOL emphasized that worker misclassification is a growing problem among employers and will receive greater scrutiny from the DOL, the Internal Revenue Service and state agencies. The DOL also opined that under the FLSA’s broad definition of employee—which emphasizes how economically dependent the worker is on the employer—“most workers are employees.”
The DOL memorandum suggests that many employers are intentionally misclassifying workers “as a means to cut costs and avoid compliance with labor laws” and thus denying employees important workplace protections such as overtime, unemployment insurance and workers’ compensation. The DOL also notes that misclassification results in lower tax revenues for government and an uneven playing field for employers who properly classify their workers. Accordingly, the DOL has entered into agreements with the IRS and twenty-five state agencies in a “multi-pronged approach” to combat the misclassification problem (such enforcement efforts resulted in the recovery of more than $79 million in back pay for more than 109,000 workers in 2014).