Significant Change Coming In U.S. Department of Labor Audits Involving Independent Contractors

July 2013

The 2014 budget for the U.S. Department of Labor was released on April 10, 2013, and it has troubling overtones for employers. By evaluating this very telling budget information, it becomes clear that the U.S. Department of Labor is unfortunately going to change the way it organizes its enforcement activities aimed at worker classification (i.e., whether certain workers are independent contractors or employees).

MORE INVESTIGATIONS BASED ON INDUSTRY: According to this 2014 budget information, the U.S. Department of Labor will increase the percentage of investigations that it does based upon industry rather than complaints.

 

In the past, the U.S. Department of Labor has based its independent contractor investigations largely on complaints made by disgruntled workers. Now, the U.S. Department of Labor will look at companies in industries with a high prevalence of worker misclassification.

 

CERTAIN INDUSTRIES MORE LIKELY TO HAVE WORKER MIS­CLASSIFICA­TION: The U.S. Department of Labor’s 2014 budget information notes that certain industries are more likely to have worker misclassification (some of the industries named in this regard are construction, janitorial, home health care, child care, transportation, warehousing, meat and poultry processing, personnel service, etc).

 

The bottom line here is that a company using independent contractors may not have any reported complaints from its workers, but that company may still be targeted by the U.S. Department of Labor for an audit.

COORDINATION WITH VARIOUS STATES: The U.S. Department of Labor continues to threaten that it is going to coordinate its efforts in investigating independent contractor status with various states. 

 

The Obama administration has been vocal about the fact that it wants to increase its investigation and enforcement of those businesses that use independent contractors and also increase its coordination with other federal and state agencies.

 

COMPANIES SHOULD HAVE INDEPENDENT CONTRACTOR RELATION­SHIPS CAREFULLY REVIEWED BY A KNOWLEDGEABLE PROFESSIONAL: Any company that uses independent contractors should realize that the climate throughout the United States is much more aggressive in terms of state and federal investigation. Therefore, those companies should be sure to have their websites, independent contractor agreements and documentation, and overall independent contractor relationships carefully reviewed by a knowledgeable professional.

 

For consultations on limiting your liability in the use of independent contractors, contact Attorney Nancy E. Joerg, who enjoys a nationwide reputation in assisting companies who use Independent Contractors of all types.  Nancy Joerg can be reached at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.