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Compensaton and Benefits

New Strategic Plan by US DOL Includes Identification of Independent Contractor Misclassification As A Targeted Objective

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On September 30, 2010, the U.S. Department of Labor released its Strategic Plan for Fiscal Years 2011 – 2016.  Among the goals listed by Labor Secretary Hilda Solis is to identify and deter the misclassification of employees as independent contractors.  

The Strategic Plan states in part as follows:

WHD will be a key partner in a joint Department of Treasury-Department of Labor initiative to detect and deter the misclassification of employees as independent contractors and to strengthen and coordinate federal and state efforts to enforce labor law violations arising from misclassification. Individuals wrongly classified as independent contractors are denied access to critical benefits and protections – such as family and medical leave, overtime, minimum wage and unemployment insurance – to which they may be entitled as regular employees. Employee misclassification also generates substantial losses to the Treasury and the Social Security, Medicare, and Unemployment Insurance Trust Funds. In its last comprehensive estimate of the scope of the misclassification problem for tax year 1984, the Internal Revenue Service estimated that 15 percent of all employers misclassified a total of 3.4 million employees as independent contractors, resulting in an estimated annual revenue loss of $1.6 billion in 1984 dollars ($3.4 billion in 2010 dollars). (Click “More” for “Commentary” below)


Commentary: The commitment of the U.S. Department of Labor to detect and deter misclassification is unwavering, and it has the resources allocated to it in the Budget by the Obama Administration to make substantial inroads, on its own and together with the Treasury Department, in curtailing and penalizing misclassification.  Meanwhile, many state Labor Departments and state Attorneys General have taken increasingly aggressive steps to detect and deter misclassification.

In an unusual twist, it appears that the federal government is actually following in the footsteps of state governments when it comes to misclassification.  Indeed, before becoming the Solicitor of Labor in the U.S. Department of Labor, M. Patricia Smith was the leader of the New York State Joint Employment Taskforce on Misclassification, while serving as Commission of Labor in New York.

Should Congress not proceed quickly enough in passing the two pending misclassification bills jointly introduced in the House and Senate this year (the Employee Misclassification Prevention Act and the Fair Playing Field Act of 2010), it is likely that, in the short term, even more states will pass new or more stringent laws cracking down on misclassification.

Meanwhile, many state Unemployment offices are beginning to question more and more businesses about misclassification of workers being treated by employers as independent contractors.  And where state Unemployment offices determine that workers have been misclassified, they are now sharing such information with the IRS in over 30 states under the November 2007 Questionable Employment Tax Practice (QETP) initiative.  Under that program, state employment officials have agreed to share information about misclassification with the IRS, and vice-versa, pursuant to individual information-sharing agreements between the IRS and the 30+ states that have now signed on with the IRS.


Richard Reibstein is a partner in the Labor and Employment Practice Group of Pepper Hamilton LLP, resident in the New York office.

Mr. Reibstein has more than 25 years of experience in private practice representing employers and senior management in all areas of employment and labor law, preceded by two years of government service with the National Labor Relations Board and U.S. Department of Labor.

Prior to joining the firm, Mr. Reibstein was a partner in WolfBlock’s Employment Services Practice Group and headed the firm’s labor and employment practice in the New York office.

Mr. Reibstein regularly counsels and defends employers in claims involving employment discrimination (including sexual harassment, hostile work environment and disability claims), wrongful discharge, and workplace torts (including defamation, fraud, invasion of privacy, tortious interference and negligent hiring and retention). He represents management at NLRB proceedings, arbitrations, and collective bargaining negotiations, and counsels employers on remaining union-free. He also defends employers in the areas of family and medical leaves, benefit disputes, workplace investigations, and the specialized areas of construction and health care labor laws, and litigates school and business disputes.

In the area of independent contractor and wage/hour compliance, Mr. Reibstein designs programs for companies to enhance compliance with such laws at the federal and state levels, and defends businesses before administrative agencies and the courts in single plaintiff and class action employee misclassification claims. He co-heads Pepper’s Independent Contractor Compliance Practice Group, an interdisciplinary team of more than 25 labor, tax and employee benefits attorneys. He also co-publishes a blog on the subject at

In addition, Mr. Reibstein crafts corporate protection plans and negotiates and drafts state-of-the-art non-compete agreements, confidentiality pledges, and other types of restrictive covenants. He counsels clients on securing compliance with such agreements by departing employees and their new employers and, conversely, how to hire key employees of competitors who have signed these types of agreements. Where necessary, he litigates controversies across the country involving non-compete and non-solicitation provisions, trade secret obligations, and employees’ fiduciary duty of loyalty. He has obtained temporary restraining orders and preliminary injunctions and secured “consent judgments,” including one that permanently restrained a client’s former employees and their new employer from doing business with certain customers, required payment of damages for unfair competition, and ordered reimbursement of the client’s legal fees and expenses. Mr. Reibstein is currently handling an $85 million unfair competition and trade secrets case by a reinsurance brokerage client against its largest competitor for inducing a breach of its former employee’s duty of loyalty, misappropriation of key software and unfair competition.

Mr. Reibstein has represented clients with nationwide operations as well as employers based in Europe, Canada, Latin America and the Pacific Rim. He has secured dismissals and favorable judgments in more than 90 cases in the federal and state courts, including an increasing number of trials. His three most recent jury verdicts resulted in the dismissal of a federal court lawsuit for sexual harassment and race discrimination, the dismissal of 7 of 8 claims for retaliation and hostile work environment, and the dismissal of 4 of 5 claims for sexual harassment and medical leave. Mr. Reibstein’s most significant accomplishments, though, are the hundreds of threatened and anticipated lawsuits he has avoided for clients that have sought his advice and counsel before being sued.

Mr. Reibstein has lectured and written extensively in the areas of labor and employment law and is a recognized authority in the area of workplace torts. He co-authored two books on the subject, Employer’s Guide to Workplace Torts (Bureau of National Affairs, 1992) and Negligent Hiring, Fraud, Defamation and Other Emerging Areas of Employer Liability (Bureau of National Affairs, 1988), and has written a number of articles on recent developments in the law of workplace torts and how employers can minimize legal exposure to such claims. He also served as an expert witness in the area of workplace torts in an $80 million taxpayer refund case.

Mr. Reibstein is regularly quoted in local and national newspapers and publications as well as legal and employee relations publications. Some of his most recent writings and presentations have dealt with independent contractor compliance, non-compete agreements and restrictive covenants, avoiding workplace defamation claims, disability discrimination, and construction labor law.

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