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Jan
2015
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Employee Misclassification Crackdown Expands Further South with Signing of Florida MOU

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Florida has become the 19th state to sign a memorandum of understanding (MOU) with the Department of Labor (DOL) aimed at fighting the misclassification of employees as independent contractors.  The partnership was announced Monday by the Administrator of the Wage and Hour Division, David Weil.

In a statement following the announcement, Marshall Stranburg, Executive Director of the Florida Department of Revenue, said:

“By partnering with the U.S. Department of Labor we are actively working to level the playing field for Florida’s businesses to stop the misclassification of workers.  Businesses that misreport workers obtain an unfair advantage over other law-abiding businesses.”

The agreement is different from the 18 MOUs the DOL has signed with other states. Those agreements coordinate multiple state agencies with the DOL.  This latest version only applies to the Florida Department of Revenue, which collects state unemployment insurance but does not have authority over minimum wage or overtime violations, which are often violations that occur with misclassified employees.  No explanation of why this agreement differs from the rest of the initiative has been given.  

The lawfirm of Pepper Hamilton suggests the Florida Department of Revenue’s decision to sign the MOU is part of a broader trend of enforcement expansion in the South:

1.  The crackdown on IC misclassification has expanded into the Southeast.

Florida is the first state to sign a partnership with the federal Labor Department in 2015, but it signifies a growing crackdown on illegitimate IC misclassification by states in the Southeast, as it joined Louisiana and Alabama as signatories to these types of federal -state partnerships. Companies that conduct business in that region of the country should expect those states that have signed partnership agreements with the federal government to more closely scrutinize IC relationships to determine if they involve “legitimate independent contractors,” to use Dr. Weil’s phrase.

They also warn of the pitfalls of an isolated incident creating long-term damage for a company:

2.  An oft-overlooked form of IC misclassification exposure: unemployment claims

The Florida Department of Revenue’s signature on the memorandum of understanding focuses attention on one type of IC misclassification exposure that many businesses tend to overlook –liability for state unemployment insurance taxes. As we have noted in prior blog posts, unemployment claims create more legal challenges to a company’s use of ICs than any other types of administrative or judicial claims. In our February 5, 2013 blog post entitled “Unemployment Benefit Claims and Independent Contractor Misclassification Liability: A Single Claim by One Worker Can Lead to Disastrous Results,” we outlined how “a single claim won by a misclassified employee for unemployment benefits can lead to the beginning of an array of IC misclassification claims dealing with the company’s other ICs – unless the company engages in best practices.”

Misclassification is a major problem in Florida.  Last year’s breakthrough investigative report from McClatchy revealed as much.

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