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Labor Department Hands Out Money for Misclassified Worker Enforcement

September 22, 2014

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The U.S. Department of Labor has awarded more than $10 million to 19 states to implement or improve worker misclassification detection and enforcement initiatives in unemployment insurance programs.

The funds will be used to increase the ability of state unemployment insurance tax programs to identify instances where employers improperly classify employees as independent contractors or fail to report the wages paid to workers at all, according to the department.

While several states have existing programs designed to reduce worker misclassification, this is the first year that the Labor Department has awarded grants dedicated to this effort.

Among the states receiving money under the program are California, where there have been several cases in which courts have found trucking companies wrongly classified workers as independent contractors rather than employees. In August, the U.S. Ninth Circuit Court of Appeals ruled two classes of individuals working for FedEx Ground in California and Oregon were misclassified as independent contractors instead of employees. 

Under a bonus program, Maryland, New Jersey, Texas and Utah will receive a share of $2 million in additional grant funds due to their high performance or most improved performance in detecting incidents of worker misclassification. The remaining $8.23 million was distributed to 19 states, including these four, in competitive grants.

"This is one of many actions the department is taking to help level the playing field for employers while ensuring workers receive appropriate rights and protections," said U.S. Secretary of Labor Thomas E. Perez. "Today's federal grant awards will enhance states' ability to detect incidents of worker misclassification and protect the integrity of state unemployment insurance trust funds.”

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