The U.S. Department of Labor (“U.S. DOL”) and the Alaska Department of Labor and Workforce Development recently signed a memorandum of understanding to share information and conduct joint investigations regarding independent contractor misclassification. The agreement is part of the U.S. DOL’s Misclassification Initiative, the goal of which is to prevent, detect, and remedy employee misclassification. Just last month Kentucky’s Labor Cabinet entered into a similar agreement. Alaska is the 25th state to sign a memorandum of understanding with the Department of Labor as part of its misclassification initiative. The other states signing the memorandum are Alabama, California, Colorado, Connecticut, Florida, Hawaii, Idaho, Illinois, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New York, Rhode Island, Texas, Utah, Washington, Wisconsin and Wyoming.
The coordinated effort between the U.S. DOL and participating states raises the stakes for companies who utilize independent contractors. In the past, a company in Alaska might pay a single fine to a state agency for not making proper unemployment insurance payments due to misclassification of its workers. Under the new agreement, Alaska will now share this information with the U.S. DOL, which may opt to cooperate in the underlying investigation, or conduct a separate investigation. As such, companies in Alaska, like those in the 24 other states that have signed memoranda with the U.S. DOL, should expect that any misclassification inquiry will automatically expand to include both state and federal agencies, thereby increasing the scrutiny on such companies and the risks associated with a misclassification determination.