The Obama administration and 11 states will join an effort tocrack down on companies such as homebuilders, hotels andrestaurants that classify employees as independent contractors toavoid paying overtime.

The Labor Department and states agreed to share informationfiled by companies as the department finds and prosecutes companiesthat misidentify workers in order to skirt paying unemploymentbenefits or federal taxes, according to Mike Wald, an agencyspokesman.

Misclassifying employees “makes it harder, especially forlow-wage workers, to put food on the table,” Labor Secretary HildaSolis said today on a conference call with reporters.

The Obama administration is stepping up enforcement ofwage-and-hour laws, which set minimum pay and define positionswhere overtime pay is required, targeting industries such asresidential construction, hotel, restaurant, janitorial, health-and day-care, the department said in a statement.

“We are actively looking at those industries that employ themost vulnerable workers and that engage in business practices, suchas misclassifying employees as independent contractors, that resultin violations of minimum wage and overtime laws,” according to thee-mailed statement.

PulteGroup Inc., the nation's largest homebuilder, received arequest from the Labor Department for information, which is underreview, said Jim Zeume, a spokesman for the Bloomfield Hills,Michigan-based company. He referred questions on the issue to theWashington-based Leading Builders of America, representing 19companies. Ken Gear, a group spokesman, didn't return phone callsseeking comment.

$2.72 Billion Cost
A GovernmentAccountability Office report from 2009 found misclassification ofworkers cost the government $2.72 billion in 2006. A 2000 LaborDepartment report estimated that as many as 30 percent of employersmisclassify workers to exempt them from overtime and other wagelaws.

U.S. laws on classifying workers to set wages are vague, saidRandy Johnson, a senior vice president at the U.S. Chamber ofCommerce, the nation's largest business group. The Labor Departmentand the IRS have different tests for violations of these laws, hesaid today in an interview.

“The department needs to be very careful that it is only goingafter true violators of the law rather than those with whom thereis a disagreement of the law,” he said. “If they are justexploiting vagueness in the law, it's regulatory overreach.”

Agreements with the states may subject companies to more thanone fine for the same violation. In the past, a company mightsettle with a state agency for an improper payments ofunemployment-insurance benefits. Under the accord, states now willshare information about a company with the Labor Department, whichwould seek fines and penalties under federal law. The violationscould also be reported to the Internal Revenue Service, which couldseek unpaid taxes from the company.

Connecticut, Hawaii, Illinois, Maryland, Massachusetts,Minnesota, Missouri, Montana, New York, Utah and Washington haveagreed to work with the Labor Department.

The Wall Street Journal previously reported the agency wasexamining pay practices in the homebuilding industry.

Bloomberg News

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