WASHINGTON (AP) — The Labor Department is signing agreements to share information with nine states and the Internal Revenue Service as it gets more aggressive in its program to crack down on businesses that cheat workers out of their hard-earned wages.

The information will help Labor officials target businesses that improperly label workers as independent contractors or as non-employees to deprive workers of minimum wage and overtime pay. Misclassifying workers also lets companies avoid paying workers compensation, unemployment insurance and federal taxes.

Patricia Smith, the Labor Department’s top lawyer, said sharing information between state and federal agencies could subject businesses to multiple fines.

“There’s more of an incentive to be in compliance because the cost of what we consider to be illegal activity has increased,” Smith said in an interview.

In the past, Smith said, a company might pay a single fine to a state agency for not making proper unemployment insurance payments. Under the new agreements, a state can share the information with the Labor Department, which can seek fines and penalties for federal wage violations too.

The violation would also be reported to the IRS, which can go after the company for unpaid taxes, Smith said.

States that have agreed to work with the Labor Department so far include Connecticut, Hawaii, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington. New York plans to sign up in the near future.

Labor Secretary Hilda Solis has made increased enforcement of federal wage-and-hour laws a top priority since she took office in 2009. The department has focused on industries where so-called “wage theft” is considered a problem, including the hotel, restaurant, janitorial, health care and day care industries.

Last month, the agency began targeting large U.S. homebuilders to see if they failed to pay workers the minimum wage or overtime.

“The urgency of addressing this issue has become more pronounced because we’re seeing these illegal business practices used by more and more industries, like restaurants,” said Nancy Leppink, head of the department’s Wage and Hour Division.

Earlier this year, for example, the department recovered over $219,000 in back wages for 44 Boston-area restaurant workers who were misclassified as independent contractors by two restaurants. The restaurants had failed to pay them overtime and also weren’t paying their payroll taxes.

Scott DeFife, a vice president for policy and government affairs at the National Restaurant Association, said his group works closely with members to navigate the “increasingly complex” federal and state rules governing wage and hour issues.

“We support 100 percent compliance with the law,” he said.

Leppink said employers who do follow the law are finding it difficult to compete against those businesses that are misclassifying their workers.

In 2010, the Labor Department collected nearly $4 million in back wages on behalf of about 6,500 employees who had been misclassified, a 400 percent increase over the amount collected in 2008. The department has hired about 300 additional investigators to probe wage theft complaints.

Leppink said getting more referrals from states or the IRS would help the agency increase enforcement efforts.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

Comments (4)
  1. Friends of the People says:

    It looks like the state is trying to get money that doesn’t belong to them in the first place. Why not give the money to the workers who was not paid, instead the state keeps these money for themselves. That’s Baloney.

  2. Norge says:

    They want to REALLY help MN and mid-west families? Then the Feds should rescind all the farm-labor expemptions granted corporate farms. These farm operations get to work their help 80hrs. a week and pay NO overtime, NO work-comp. insurance, seldom have any health care and can work people for 10hrs before midnight and ten hours after midnight for 20 continuous hours and call it two-ten hour shifts…and these guys are often driving 40-60,000lbs of grain on your roads on little or no sleep. Then these corporate farmers will cry to the govenor to lift ‘weight-restrictions’ on trucks so they can make less trips and tear up the tax-payer funded roads, while they claim fuel-expemtions and increase their profit margins. Last year in our county farmers ‘NETTED” $600 per acre, yet they hire illegals to drive their trucks while the law and the feds look the other way, and then they get road, fuel and weight expemtions. They get wage and overtime exemptions, provide little work-comp coverage, (as the help is called independent-operators, so they do not have to verify legal immigration status) and basically stick em in trucks, then stick it to the rest of the state while they are piling up record profits. If you’re a corperation, then you should be forced by LAW to play by corperate rules, including 40hr work weeks, and mandatory overtime pay, work-comp, and no wieight expemptions other truckers don’t get…why should the non-farmers pay for all the damage to our roads that farms trucks rip up every two or three years. I come from a real ‘family’ farm and we treat our livestock better then most corporate farms treat their workers. Yet our legislature and govenor are strangely silent to the lobbying of the handful of rich, corporate farm jerks who contribute big bucks to make even bigger tax-exempt wealth and aquisitions. The corrupt politicians of the DFL for 25ys killed the real family farms for political wealth and power, lets see if the ‘Pubs do any better for the workers at corporate farms!

    1. Karl says:

      Its called the DFL for a reason

  3. Sue J says:

    Well I guess the Union can come in and demand more wages and shut them down.

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