Wage and Hour Guidance: IRS and Department of Labor Focus on Worker Misclassification
Employers should be aware of two recent announcements from the U.S. Department of Labor (“DOL”) and the Internal Revenue Service (“IRS”) regarding the misclassification of workers as independent contractors or non-employees. First, the DOL on September 19, 2011 signed a memorandum of understanding with the IRS that is designed to improve the DOL’s efforts to curtail employee misclassification by employers by sharing information with both the IRS and participating states. Second, the IRS announced on September 21, 2011 the launch of a new program, the Voluntary Classification Settlement Program (“VCSP”), that will enable employers to resolve prior misclassification of employees as independent contractors. The VCSP significantly limits past taxes for misclassified workers if an employer comes forward voluntarily in an attempt to comply with the tax laws.