We know that last year California had signed into an information sharing agreement with the IRS regarding worker classification audits. California was one of the first states to enter into one of these sharing agreements, for that matter they are also one of the only states to have two agreements with the IRS. The two agreements they signed into are for the Franchise Tax Board and the Employment Development Department, which deals with unemployment benefits.

Earlier this month, California signed its third agreement, this time for a Memorandum of Understanding with the Department of Labor (DOL). This understanding goes beyond the previous two agreements signed and involves both DOL and IRS sharing information, also other joint departments, in effort to audit and penalize employers for misclassifying workers as independent contractors. These efforts are to help reduce the incidences of misclassification of employees, to help reduce the tax gap, and to improve the compliance with the federal labor laws. California wasn’t the only one who signed the understanding but also eleven other states have signed similar agreements. For more details on each agreement, information can be viewed on the DOL’s dedicated workers misclassification page.

Last year, the Wage and Hour Division of the DOL collected $5M in back wages, that is not including all the fines and penalties from employers misclassifying independent contractors. For those employers who are misclassifying, you might want to think again because the DOL is increasing their efforts since they got a hefty budget and staff increase for 2012 and they have state agencies get on board with their efforts.