Obama Administration Proposed Initiative To Combat Misclassification Of Employees As Independent Contractors

President Obama’s proposed federal budget for the 2011 fiscal year highlights one of its key enforcement priorities - to fight the misclassification of employees as independent contractors. The proposed budget for the Department of Labor includes a $25 million “Misclassification Initiative”, which is intended to assist the Department in identifying and reducing employee misclassification. If passed, the initiative would allow the DOL to hire additional investigators and enforcement personnel and would create competitive grants to encourage the states to address the issue. From the Administration’s perspective, employers who misclassify employees as independent contractors gain potentially unfair tax and other financial advantages and deny employees the protections of many federal labor and employment laws. The DOL believes that greater enforcement measures are needed because it perceives employees as being particularly vulnerable to misclassification in the current economic climate.