Connecticut Joins Pact on Employee Misclassification Initiative

The misclassification of employees as independent contractors, presents a serious issue for affected employees, employers, and to the economy. Misclassified employees are often denied access to critical benefits and protections such as family and medical leave, overtime, minimum wage and unemployment insurance. Employee misclassification as independent contractors, also generates substantial losses to the Treasury and the Social Security and Medicare funds, as well as to state unemployment insurance and workers compensation funds. In September 2011, the U.S. Department of Labor (DOL) signed a Memorandum of Understanding (MOU) with the Internal Revenue Service. Under this agreement, the agencies will work together and share information to reduce the incidence of misclassification of employees, to help reduce the tax gap, and to improve compliance with federal labor laws. Additionally, the DOL’s Wage and Hour Division (WHD), Occupational Safety and Health Administration (OSHA), and Employee Benefits Security Administration (EBSA) entered into an agreement with the State of Connecticut’s Department of Labor.They have established the specific and mutual goals of providing clear, and accurate, compliance information to employers, employees; and of sharing resources and conducting coordinated enforcement efforts to reduce employee misclassification. Connecticut employers should be aware that there are different standards between the IRS and CT Department of Labor on the classification of an employee versus an independent contractor.Employers should evaluate their use of independent contractors and realize that misclassification issues are at the top of Federal and State agency enforcement agendas.

Tom Scanlon, CPA, CFP® has over thirty-five years experience in public accounting with an extensive background in the areas of financial, tax and estate planning.

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