Employers Misclassifying Workers Face Joint Federal/State Investigations

Brian J. Hoffman, The Legal Intelligencer
November 22, 2016

Employers have often played “fast and loose” with regulations governing workforce classification, tempted by the significant savings associated with independent contractor treatment. As such, in August 2016, Pennsylvania became the 35th state to reach an agreement with federal authorities to coordinate inquiries and share enforcement data in wage and hour investigations.

The Pennsylvania Department of Labor and Industry (PA DOL) and the United States Department of Labor (“US DOL”) inked a Memorandum of Understanding which serves to facilitate the exchange of information during enforcement actions. Historically, a particular focus of both the US DOL and PA DOL has been the misclassification of employees as independent contractors. Previously, an investigation by the PA DOL or US DOL of an employer would NOT necessarily lead to a reciprocal investigation by the other party. Now, given the execution of the Memorandum of Understanding, employers should expect that a wage and hour investigation by one department will likely lead to an investigation by the other. As such, employers challenged on employment classification practices while under audit will likely see overall liabilities increase during any given inquiry, as both federal and state taxes and penalties will be imposed.

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