Labor teams with IRS to take on employers who misclassify workers

Friday - 9/23/2011, 11:01am EDT

Nancy Leppink, deputy administrator of the Wage and Hour Division, Labor Department

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It's a growing and — to officials at the IRS and Labor Department — disturbing trend. More employers are misclassifying their employees. For example, full-time workers are sometimes called "contractors" so the employer won't have to pay as much in taxes.

Labor Department, the IRS and several states are now working together to track down these unscrupulous bosses.

Nancy Leppink, the deputy administrator of the Wage and Hour Division at Labor, joined the Federal Drive with Tom Temin and Amy Morris to discuss why misclassification is a problem — and why the problem is getting worse.

There are implications under both state and federal laws, Leppink said, which is why there needs to be better collaboration and information, she said.

Misclassification isn't just a paperwork issue, she added. It can often have consequences down the road in terms of overtime pay, workers' compensation issues as well as tax withholding headaches.

"This is the culmination of a lot of efforts that particularly the wage and hour division and other agencies within the Department of Labor have had regarding this issue of misclassification," Leppink said.