Independent Contractor Compliance Blog - by Collabrus™

The already huge U.S. Department of Labor (DOL) is asking Congress for $116.5 billion in funding and 17,800 full-time employees for fiscal year 2011 budget. During a recent budget hearing, (conducted by the House Appropriations Committee’s Subcommittee on Labor, Health and Human Services, Education and Related Agencies) Labor Secretary Hilda Solis testified that in addition to its regular enforcement efforts the agency intends to use these funds to get tougher on employee misclassifications (this is the common practice of misclassifying a worker as an independent contractor when, in fact, they should have been classified as an employee).

How much does DOL want to spend on enforcing IC compliance?

Secretary Solis testified that $1.7 billion in discretionary funds and 10,957 full-time equivalent employees would be devoted to worker protection activities to identify and deter instances of employee misclassification as independent contractors.

Including:

• $25 million to create a multi-agency program to coordinate federal and state efforts on misclassification enforcement,
• Hire an additional 100 investigators to target misclassified workers in a joint initiative with the Department of the Treasury (IRS).
• $12 million and 90 new investigators to expand the enforcement efforts of DOL’s Wage and Hour Division (WHD).
• Another $244.2 million for the WHD would go for targeted investigations and compliance assistance. It would also be used to identify violations of minimum wage, overtime, and workplace safety laws.
• $10.9 million to recoup unpaid payroll taxes through state audits.
• Prosecuting employers that fail to pay the appropriate taxes due to worker misclassification.
• $1.6 million to the Office of the Solicitor to hire 10 full-time equivalent employees and to enhance enforcement strategies.
• $150 thousand to the Occupational Safety and Health Administration (OSHA) to train inspectors on worker misclassification issues.

The Secretary’s testimony is just another indicator of the major shift in focus and resources towards employee misclassification enforcement by the Obama administration.

Increased IC compliance enforcement is a major cornerstone of the new federal tax enforcement and revenue collection model. I believe the federal government’s goal is to insure misclassified workers and those not already on the wage earner’s radar are identified and placed in The System. It all ties in with 1099 reporting for IC’s, efforts to get withholding on 1099 payments, repealing the IRS Safe Harbor section and other proposals that have been recently introduced. 

(You may read about all of these on this blog site)

Don’t wait until you have been targeted. A dollar spent in insuring you are protected today could save your company many times that in the near future.