On August 4, 2016, the U.S. Department of Labor (“U.S. DOL”) and the Pennsylvania Department of Labor and Industry (“PA DOL”) signed a memorandum of understanding (MOU) to coordinate efforts, by sharing information and conducting joint investigations on employers who may be violating one or more of the state or federal wage and hour laws that each agency has been charged with enforcing. (The MOU can be accessed here https://www.dol.gov/whd/workers/MOU/pa.pdf). One area of common interest to both agencies has been the misclassification of employees as independent contractors. The MOU is part of the U.S. DOL’s Misclassification Initiative, the stated goal of which is to “combat employee misclassification and to ensure that workers get the wages, benefits, and protections to which they are entitled.”
Pennsylvania, along with 35 other states, including Connecticut, Massachusetts and New York, to name a few, will now coordinate investigations and share information with the federal government for the stated purpose of enhancing the enforcement of both federal and state wage and hour laws. In the past, an employer in Pennsylvania (or other non-participating state) might pay a single fine to a state agency for a wage and hour related violation. The coordinated effort between the U.S. DOL and participating states could now result in a total increase in penalties assessed against employers for violations of both state and federal laws.
The legal determination of whether a particular employee has been properly classified as, or is in fact, an independent contractor is ultimately made by a court of law, not by the U.S. DOL or PA DOL. Such determinations are based on a number of factors, which HR Legalist discussed after DOL administrator, David Weil, issued a new Administrator’s Interpretation addressing the misclassification of employees as independent contractors. According to the Fair Labor Standards Act (FLSA) the definition of “employee” is very broad, and employers who misclassify employees as independent contractors could find themselves facing enforcement actions from the DOL’s Wage and Hour Division. The U.S. DOL’s most recent MOU with Pennsylvania represents a further step in federal interest in state wage and hour matters. In light of the ongoing, coordinated efforts of federal and state agencies to enforce the broader U.S. DOL’s interpretation of “employee,” employers who rely on “independent contractors” as part of their workforce should consult with legal counsel to ensure that those workers are properly classified.
Thomas T. Hearn is an attorney in the Labor Relations and Employment Law Department at Obermayer where he concentrates his practice in labor and management relations, employment discrimination and employee contracts. He can be reached at 215.665.3013 or Thomas.Hearn@obermayer.com.