Labor Department Expands Enforcement Of Wage Violations

The Labor Department is signing agreements to share information with nearly a dozen 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 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 also can seek fines and penalties for federal wage violations. The violation also would 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. Labor officials from New York and Illinois plan to sign up in the near future. Recently, the agency began targeting large U.S. homebuilders to see if they failed to pay workers the minimum wage or overtime. 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.