DOL, IRS Renew Agreement to Continue, Improve Joint Effort to Combat Employee Misclassification

January 2023

The U.S. Department of Labor and the IRS renewed a memorandum of understanding and added a streamlined process for joint referrals and closer coordination to stop businesses from misclassifying workers and denying them their full wages, benefits and protections under the law.
The updated MOU will also help the department’s Wage and Hour Division share information and work in concert with the IRS to strengthen enforcement of federal and state laws that protect workers’ rights.
“We are determined to identify and resolve labor violations by employers who benefit by misclassifying employees as independent contractors and deprive them of the protections of the labor standards laws we enforce,” said Principal Deputy Wage and Hour Administrator Jessica Looman. “Renewing our memorandum of understanding with the IRS strengthens our existing partnership by improving referral processes and information sharing to help us better serve the nation’s workers.”
In 2011, the Wage and Hour division and the IRS first entered into a memorandum of understanding to enable both agencies to use their resources to promote employer compliance with obligations to pay employees and related employment taxes. Since then, the division and IRS have shared information when an investigation discovered that an employer had misclassified employees. By sharing information, the agencies reduce the illegal use of misclassification and the tax gap while improving compliance with federal labor laws.