Client Alert: DOL and IRS Battle Worker Misclassification

Independent contractors are prevalent in the gig economy and oil and gas, insurance, and transportation industries. Using independent contractors has advantages, including saving in employee benefits costs and payroll tax liabilities and flexibility to respond to shifting business needs. The U.S. Department of Labor (DOL) and Internal Revenue Service (IRS) are focusing enforcement efforts on worker misclassification to reduce the tax gap and improve compliance with federal tax and labor-and-employment laws. Therefore, businesses should be careful that they are not misclassifying employees as independent contractors because misclassification can result in significant wage, tax, and other liabilities.