States, feds share data on wage theft

WASHINGTON » The Labor Department is signing agreements to share information with nearly a dozen states, including Hawaii, 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 workers 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 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.

Besides Hawaii, states that have agreed to work with the Labor Department so far include Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington. Labor officials from New York and Illinois plan to sign up in the near future.

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.

Last month the agency began targeting large U.S. homebuilders to see whether they failed to pay workers the minimum wage or overtime.