The U.S. Department of Labor's Wage and Hour Division and Iowa Workforce Development have come to an agreement that prevents the misclassification of employees as independent contractors by employers.
"This memorandum of understanding sends a clear message: We're standing united to end the practice of misclassifying employees," says Mary Beth Maxwell, acting deputy administrator of the Wage and Hour Division. "This is an important step toward making sure that the American dream is still available for employees and responsible employers alike."
The Wage and Hour Division first participated in memorandums of understanding with states in September 2011 and has since developed a similar partnership with the Internal Revenue Service. Throughout this time, the Wage and Hour Division has attained $9.5 million in back wages for more than 11,400 workers. Typically, these minimum wage or overtime violations occurred because workers were not treated or classified as employees. Based on these figures, there was an 80 percent increase in back wages and a 50 percent increase in the number of workers receiving back wages.
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"Misclassification is an issue that affects all states," says Teresa Wahlert, director of Iowa Workforce Development. "This memorandum will allow Iowa to utilize federal resources that weren't available to the state previously."
While independent contractors play a critical role in the economy, the misclassification of employees often causes them to be denied access to critical benefits and protections, the DOL maintains. These include family and medical leave, overtime compensation, minimum wage pay and unemployment insurance.
Law-abiding business owners often suffer from economic pressure when others misclassify employees because it is more difficult to compete with those, the DOL maintains. When employees are misclassification, it also creates major losses for state unemployment insurance and workers' compensation funds.
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