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What's Scarier Than an Agency Audit? Three Agency Audits

By Robert G. Brody and Rebecca Goldberg

Misclassifying employees as “independent contractors” may put employers in triple jeopardy. (See article infra by Rosanna Sattler.) The U.S. Department of Labor (DOL) is teaming up with the Internal Revenue Service (IRS) and state agencies to crack down on “misclassification.” Thirteen state labor agencies have joined forces with the federal DOL in this initiative. This coordination will lead to a greater likelihood of companies being caught and a much higher cost for employers that have the unfortunate fate of the triple audit.

Misclassification occurs when an employer treats a worker as an independent contractor, even though the worker is actually an employee. The DOL has made this a top priority, seeking $3.8 million and 35 full-time workers to fight misclassification in its 2012 budget proposal. Misclassification costs the government tens of billions of dollars in lost tax revenue, so these agencies have a huge incentive to zealously pursue cases against employers.

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