Yesterday the U.S. Department of Labor (“U.S. DOL”) and the Vermont Department of Labor (“VDOL”) signed a three-year 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 Alaska’s Department of Labor and Workforce Development entered into a similar agreement.   Vermont is the 26th 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 Alaska, 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.

This agreement between Vermont and the U.S. DOL comes on the heels of an August 31, 2015 report issued by Vermont State Auditor Doug Hoffer entitled “Worker Misclassification – Action Needed to Better Detect and Prevent Worker Misclassification.”

Employers in Vermont should expect the misclassification audit report and the memorandum of understanding with the U.S.DOL to spur investigation activity within the state.  Companies in Vermont, like those in the 25 other states that have signed memoranda with the U.S. DOL, should expect that any misclassification inquiry will now automatically expand to include both state and federal agencies, thereby increasing the scrutiny on such companies and the risks associated with a misclassification determination. 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.