This post was written by Jennifer G. Betts of Ogletree Deakins’ Pittsburgh Office.
On August 4, 2016, the Pennsylvania Department of Labor and Industry signed a three-year Memorandum of Understanding (“MOU”) with the U.S. Department of Labor’s Wage and Hour Division (“DOL”). The MOU was designed to prevent the misclassification of employees as independent contractors, and to preclude other wage-and-hour violations. The agreement contemplates the following collaborative enforcement activities between the two agencies:
- joint investigations of misclassification and other wage & hour issues within the Commonwealth of Pennsylvania;
- coordination with and assistance from the DOL regarding enforcement activities within the Commonwealth; and
- referrals of potential violations of each other’s statutes.
Pennsylvania is the 32nd state to enter into such an arrangement with the DOL. The other states are: Alabama, Alaska, Arkansas, California, Colorado, Connecticut, Florida, Hawaii, Idaho, Illinois, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New Mexico, New York, Oregon, Rhode Island, South Dakota, Texas, Utah, Vermont, Virginia, Washington, Wisconsin and Wyoming.
The DOL believes these collaborations are “making a difference,” citing more than $74 million in back wages collected for over 102,000 workers in fiscal year 2015 alone. To support the MOU, the PA Department of Labor and Industry announced that it would launch a statewide misclassified workers public awareness campaign to begin in fall 2016.
Coupling Pennsylvania’s awareness campaign with the new federal overtime threshold regulations that go into effect December 1, 2016 could lead to wage-and-hour headaches for Pennsylvania employers. Companies with employees in Pennsylvania should expect heightened scrutiny over misclassification issues beginning this fall and lasting well into 2017, and also should recognize that such investigations will include both state and federal agencies.
To avoid these costly, time-consuming, and distracting investigations, employers who do business in Pennsylvania (or states with other similar agreements) should look carefully at all of the workers they have classified as overtime exempt and/or as independent contractors and evaluate whether the classification is appropriate.