Secretary of Labor Hilda L. Solis, on Sept. 19, 2011, hosted a ceremony at U.S. Department of Labor (DOL) headquarters in Washington, D.C., to sign a memorandum of understanding with the Internal Revenue Service (IRS) that will improve departmental efforts to end business’s misclassification of employees. The memoranda of understanding will enable the DOL to share information and coordinate law enforcement with the IRS and participating states in an effort to level the playing field for law-abiding employers and ensure that employees receive the protections to which they are entitled under federal and state laws. “This agreement takes the partnership between the IRS and Department of Labor to a new level,” said IRS Commissioner Doug Shulman. “In this new phase of our relationship, we will work together more efficiently to address worker misclassification issues and better serve the needs of small businesses and employees.” Business models that attempt to change, obscure or eliminate the employment relationship are not inherently illegal unless they are used to evade compliance with federal labor laws—for example, if an employee is misclassified as an independent contractor and subsequently denied rights and benefits to which he or she is entitled under the law. In addition, misclassification can create economic pressure for law-abiding business owners.

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