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Mass. to share wage violation data

By Sam Hananel
Associated Press / September 20, 2011

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WASHINGTON - The Labor Department is signing agreements to share information with nearly a dozen states, including Massachusetts, 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 nonemployees to deprive them 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. New York and Illinois plan to sign up.

Labor Secretary Hilda Solis has made increased enforcement of federal wage-and-hour laws a top priority since she took office in 2009. The department has focused on industries where so-called wage theft is considered a problem, including the hotel, restaurant, janitorial, health care, and day care industries.

Earlier this year, for example, the department recovered over $219,000 in back wages for 44 Boston-area restaurant workers who were misclassified as independent contractors by two restaurants. The restaurants had failed to pay them overtime and also weren’t paying their payroll taxes.

Scott DeFife, a vice president for policy and government affairs at the National Restaurant Association, said his group works closely with members to navigate the “increasingly complex’’ federal and state rules governing wage and hour issues.

“We support 100 percent compliance with the law,’’ he said.

In 2010, the Labor Department collected nearly $4 million in back wages on behalf of about 6,500 employees who had been misclassified.