Recently, the U.S. Department of Labor announced awards of $10,225,183 in grants to 19 states to implement or improve worker misclassification detection and enforcement initiatives in their unemployment insurance programs.   California, Delaware, Florida, Hawaii, Idaho, Indiana, Maryland, Massachusetts, New Hampshire, New Jersey, New Mexico, New York, Oregon, South Dakota, Tennessee, Texas, Utah, Vermont, and Wisconsin all received grants of up to $500,000 each, with Maryland, New Jersey, Texas, and Utah each receiving shares of an additional $2 million in grant funds as a part of an innovative bonus program.   This “bonus” was awarded to those states with “high performance or most improved performance in detecting incidents of worker misclassification.”

This marks the first time the DOL has awarded grants to states dedicated to curbing misclassification.  However, the DOL’s stepped up enforcement of worker misclassification has been ongoing for several years and cooperation between the DOL and state agencies is nothing new.  For example, several states, including California and New York, have entered into formal Memoranda of Understanding with the DOL to share information regarding independent contractor misclassification, opening employers up to both federal and state liability from a single investigation.

These grants show that the DOL and state governments’ interest in worker misclassification is not waning.  Employers who have not already closely reviewed their independent contractor relationships should consider performing a privileged audit in order to assess the risk they may have of misclassification claims.