The U.S. Department of Labor Wage and Hour Division and Iowa’s Department of Workforce Development have joined in a memorandum of understanding on January 17, 2013,to protect the rights of employees by preventing their misclassification as independent contractors by employers.Iowa is the 14th state to form this type of partnership with the Labor Department.
The DOL in August 2009 determined:
- In FY 2007 states uncovered at least 150,000 workers who did not receive the benefits to which they were entitled because their employers misclassified them as independent contractors; and
- Approximately 10.3 million American workers, or 7.4 percent of the employed workforce, are classified as independent contractors, although it is not clear how many of these are misclassified.
Although legitimate independent contractors are an important part of our economy, the misclassification of employees presents a serious problem, as these employees often are denied access to critical benefits and protections – such as family and medical leave, overtime compensation, workers’ compensation benefits, minimum wage pay and Unemployment Insurance – to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often find it difficult to compete with those who are skirting the law. Employee misclassification also generates substantial losses for state Unemployment Insurance and workers’ compensation funds.
Memorandums of understanding with state government agencies arose as part of the department’s Misclassification Initiative, which was launched under the auspices of Vice President Biden’s Middle Class Task Force with the goal of preventing, detecting and remedying employee misclassification. California, Colorado, Connecticut, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington have signed similar agreements.