United States Government Accountability Office

GAO Testimony before the Subcommittee on 

Income Security and Family Support and 

Subcommittee on Select Revenue 

Measures, Committee on Ways and Means, 

House of Representatives 

EMPLOYEE 

MISCLASSIFICATION 

Improved Outreach Could 

Help Ensure Proper Worker 

Classification 

Statement of Sigurd R. Nilsen, Director 

Education, Workforce, and Income Security 

For Release on Delivery

Expected at 9:30 a.m. EDT

Tuesday, May 8, 2007 

 

GAO-07-859T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

May 8, 2007

EMPLOYEE MISCLASSIFICATION

Improved Outreach Could Help Ensure 

Highlights of GAO-07-859T, a testimony Proper Worker Classification 

before the Subcommittee on Income 

Security and Family Support and

Subcommittee on Select Revenue 

Measures, Committee on Ways and 

Means, House of Representatives 

Some workers do not receive 

worker protections to which they

are entitled because employers 

misclassify them as independent 

contractors when they should be 

classified as employees. Key 

worker protections include 

minimum hourly wage and 

overtime pay and access to

unemployment insurance. The 

Department of Labor (DOL)

enforces several labor laws to

protect workers, including the Fair 

Labor Standards Act (FLSA). 

Misclassification can also have a

negative impact on tax collection

for Social Security, unemployment

insurance, and other programs. 

This testimony draws upon a

previous GAO report and focuses 

specifically on (1) the number and 

characteristics of independent 

contractors, (2) the workforce 

protections and benefits provided 

to employees that typically are not 

available to independent

contractors, and (3) the actions 

that DOL takes to detect and 

address employee

misclassification. 

What GAO Recommends

GAO is not making new 

recommendations at this time. The 

Department of Labor generally

agreed with the recommendations 

in the GAO report, which focused 

on improvements to a worksite 

poster reaching out to workers and 

DOL’s efforts to forward 

misclassification cases to other

agencies. 

The number of independent contractors in the total employed workforce 

grew from 6.7 percent in 1995 to 7.4 percent in 2005. In 2005, there were 

10.3 million independent contractors. Independent contractors, in 2005, had 

an average age of 46 years, were almost twice as likely to be male than 

female, and almost two-thirds had some college or higher education. 

Independent contractors were employed in a wide range of industries (such 

as professional services and construction) and occupations (including sales 

and management). 

When employees are misclassified as independent contractors, they may be 

excluded from coverage under key laws designed to protect workers and 

may not have access to employer-provided health insurance coverage and 

pension plans. Moreover, misclassification of employees can affect the 

administration of many federal and state programs, such as payment of taxes 

and payments into state workers' compensation and unemployment 

insurance programs. Notably, the tests used to determine whether a worker 

is an independent contractor or an employee are complex, subjective, and 

differ from law to law. 

DOL detects and addresses misclassification of employees as independent 

contractors by investigating complaints, but does not always forward 

misclassification cases to other federal and state agencies. DOL investigators 

detect and address employee misclassification primarily when responding to 

FLSA minimum wage and overtime pay complaints. DOL procedures require 

officials to share information with other federal and state agencies whenever

investigators find possible violations of other laws. However, the district 

offices GAO contacted vary in how often they forward misclassification as a

possible violation of other laws. As one form of outreach to workers, DOL 

has an FLSA workplace poster that explains the act, but it is missing key 

contact information. 

www.gao.gov/cgi-bin/getrpt?GAO-07-859T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Sigurd Nilsen at 

(202) 512-7215 or nilsens@gao.gov. 
Mr. Chairmen and Members of the Subcommittees: 

Thank you for inviting me here today to discuss the misclassification of 

employees as independent contractors. Some workers do not receive

worker protections to which they are entitled because employers 

misclassify them as independent contractors when they should be 

classified as employees. Key worker benefits and protections include the

guarantee of workers’ rights to safe and healthful working conditions, a 

minimum hourly wage and overtime pay, freedom from employment 

discrimination, and access to unemployment insurance. In its last 

comprehensive misclassification estimate, the Internal Revenue Service 

(IRS) estimated that 15 percent of employers misclassified 3.4 million 

workers as independent contractors in 1984, resulting in an estimated tax 

loss of $1.6 billion (or $2.72 billion in inflation-adjusted 2006 dollars1

) in 

Social Security tax, unemployment tax, and income tax. 

The Department of Labor (DOL) enforces a wide range of labor laws that 

provide protections to workers, including the Fair Labor Standards Act 

(FLSA), which provides minimum wage, overtime pay, and child labor 

protections. Other federal and state agencies enforce laws that provide 

workers with additional workforce benefits and protections. 

The information I am presenting today is based on findings from a July 

2006 report, which examined various aspects of the contingent workforce.2

Today, as requested, I will focus specifically on independent contractors, 

one of eight categories of contingent workers included in our report. I will 

discuss (1) the number and characteristics of independent contractors, 

(2) the workforce protections and benefits provided to employees that 

typically are not available to independent contractors, and (3) the actions 

that DOL takes to detect and address employee misclassification. To 

identify information on the contingent workforce, we analyzed data from 

the Bureau of Labor Statistics’ (BLS) Current Population Survey (CPS), 

 1

The $2.72 billion is intended to be an estimate of the magnitude of tax loss due to 

misclassification in 2006 dollars—not an updated estimate. The actual tax loss due to 

misclassification in 2006 may be higher or lower based on the tax rates, the level of 

independent contractors used in various sectors of the economy, and the types and levels 

of misclassification observed in 2006. 

2

GAO, Employment Arrangements: Improved Outreach Could Help Ensure Proper Worker

Classification, GAO-06-656 (Washington, D.C.: July 11, 2006). In this report, we define 

“contingent work” as work arrangements that are not long-term, year-round, full-time 

employment with a single employer. 

Page 1 GAO-07-859T 
which is used to survey people about their work and workplace benefits, 

and a CPS supplement developed to collect information on the contingent

workforce; interviewed BLS officials and other researchers about 

contingent worker issues; and reviewed key workforce protection laws to 

determine coverage of contingent workers. To obtain information on 

DOL’s efforts to detect and address employee misclassification, we 

reviewed DOL documents and interviewed DOL officials and reviewed 

literature and interviewed researchers about employee misclassification 

issues. We performed our work in accordance with generally accepted 

government auditing standards between July 2005 and June 2006. 

In summary, the number of independent contractors in the total employed 

workforce grew from 6.7 percent in 1995 to 7.4 percent in 2005. In 2005,

there were 10.3 million independent contractors.3

 Independent

contractors, in 2005, had an average age of 46 years, were almost twice as 

likely to be male than female, and almost two-thirds had some college or 

higher education. Independent contractors were employed in a wide range 

of industries (such as professional services and construction) and 

occupations (including sales and management). The tests used to 

determine whether a worker is an independent contractor or an employee 

are complex, subjective, and differ from law to law. Nevertheless, when 

employees are misclassified as independent contractors, they may be 

excluded from coverage under key laws designed to protect workers and 

may not have access to employer-provided health insurance coverage and 

pension plans. Moreover, misclassification of employees can affect the

administration of many federal and state programs, such as payment of 

taxes and payments into state workers’ compensation and unemployment 

insurance programs. Finally, DOL detects and addresses misclassification 

of employees as independent contractors by investigating complaints, but 

does not always forward misclassification cases to other federal and state 

agencies. DOL investigators detect and address employee misclassification 

primarily when responding to FLSA minimum wage and overtime pay 

complaints. DOL procedures require officials to share information with 

other federal and state agencies whenever investigators find possible 

violations of other laws. However, the district offices GAO contacted vary

in how often they forward misclassification as a possible violation of other

 3

Estimates of the size and characteristics of the contingent workforce are based on CPS 

sample data and are subject to sampling error. For example, the 95 percent confidence

intervals for percentages of the total workforce are within +/- 1 percentage point of the 

estimate itself. For a full explanation of the methodology that we used and for the 

magnitude of sampling error for CPS estimates, see GAO-06-656. 

Page 2 GAO-07-859T 
laws. As one form of outreach to workers, DOL has an FLSA workplace 

poster that explains the act, but is missing key contact information. GAO 

recommended in its July 2006 report that DOL revise the workplace poster 

to include additional contact information that would facilitate the 

reporting of potential employee misclassification complaints, and evaluate

the extent to which misclassification cases identified through 

investigations are referred to the appropriate federal or state agency, and 

take action to make improvements as necessary. DOL generally agreed 

with both recommendations. 

The term “contingent work” can be defined in many ways to refer to a 

variety of nonstandard work arrangements. Broadly defined, “contingent 

work” refers to work arrangements that are not long-term, year-round, fulltime employment with a single employer. For example, an employer may 

hire workers when there is an immediate and limited demand for their 

services, without any offer of permanent or even long-term employment. 

Independent contractors, temporary workers, and part-time workers are 

examples of contingent workers. Specifically, independent contractors can 

be seen as individuals who obtain customers on their own to provide a 

product or service (and who may have other employees working for 

them), such as maids, realtors, child care providers, and management 

consultants. 

Background 

Research has shown that employers use contingent work arrangements for 

a variety of reasons. Employers may hire contingent workers to 

accommodate workload fluctuations, fill temporary absences, meet 

employees’ requests for part-time hours, screen workers for permanent 

positions, and save on wage and benefit costs, among other reasons. 

Previous analyses of data from the CPS Contingent Work Supplement have 

indicated that workers also take temporary and other contingent jobs for a 

variety of personal and economic reasons. For example, workers in 

various types of contingent jobs indicated that they (1) preferred a flexible

schedule to accommodate their school, family, or other obligations; 

(2) needed additional income; (3) could not find a more permanent job; or 

(4) hoped the job would lead to permanent employment. Studies using 

data from the BLS National Longitudinal Survey of Youth show that events

such as the birth of a child or a change in marital status affect the 

likelihood of entering different types of employment arrangements and 

prompt some workers to enter contingent work arrangements. 

Concerns arise when employers misclassify workers as independent 

contractors, who are excluded from certain worker protections. Employee 

Page 3 GAO-07-859T 
misclassification occurs when an employer improperly classifies a worker 

as an independent contractor when the worker should be classified as an 

employee. In 2000, we reported that because most key workforce 

protection laws cover only workers who are employees, independent 

contractors and certain other contingent workers, such as self-employed 

workers, are, by definition, not covered.4

DOL may encounter employee misclassification while enforcing worker 

protection laws. DOL’s mission is to promote the welfare of job seekers, 

workers, and retirees in the United States by improving their working 

conditions, advancing their opportunities for profitable employment, 

protecting their retirement and health care benefits, helping employers 

find workers, strengthening free collective bargaining, and tracking 

changes in employment, prices, and other national economic 

measurements. In carrying out this mission, DOL enforces a variety of

worker protection laws, including those guaranteeing workers’ rights to 

safe and healthful working conditions, a minimum hourly wage and 

overtime pay, freedom from employment discrimination, and 

unemployment insurance. 

In particular, DOL’s Employment Standards Administration’s (ESA) Wage 

and Hour Division enforces FLSA. The Wage and Hour Division—with 

staff located in 5 regional and 72 district, area, and field offices throughout 

the country—conducts investigations of employers who have $500,000 or 

more in annual sales volume. In addition, the division conducts outreach 

efforts for employers and workers to ensure compliance with FLSA. 

District directors oversee investigators, who play a key role in carrying out

FLSA enforcement. Investigators are trained to investigate a wide variety

of workplace conditions and complaints and enforce a variety of labor 

laws in addition to FLSA.5 Regional and district offices conduct outreach 

to employers and workers through brochures, workplace posters, 

presentations or training sessions for individuals or groups, and Webbased information. 

 4

GAO, Contingent Workers: Incomes and Benefits Lag Behind Those of Rest of Workforce, 

GAO/HEHS-00-76 (Washington, D.C.: June 30, 2000). 

5

Complaints are a key component of DOL enforcement efforts under many federal labor 

laws. DOL enforcement generally relies on two types of information to identify potential 

violations: (1) complaints from individuals who believe they may have suffered a violation 

and (2) analysis of data to specifically target problematic industries or work sites. 

Page 4 GAO-07-859T 
FLSA—which provides minimum wage and overtime pay protections—

requires that employers pay those employees covered by the act at least 

the minimum wage and pay overtime wages when they work more than 

40 hours a week. FLSA requires that an employer-employee relationship 

exist for a worker to be covered by the act’s provisions. 

In 2005, an estimated 7.4 percent of the total employed workforce were 

independent contractors. By comparison, 6.7 percent of the workforce 

were independent contractors in 1995. During this time period, the number 

of independent contractors grew from an estimated 8.3 million to 10.3 

million workers in 2005. (In 2005, there were about 42.6 million contingent 

workers in the workforce—representing an estimated 31 percent of the 

workforce.)

Independent contractors, in 2005, were on average 46 years old. The 

majority were men (65 percent), had attended or graduated from college, 

and 8 out of 10 were white, non-Hispanic. Independent contractors were 

employed in a wide range of industries, but in 2005, 23 percent were 

employed in professional services and 22 percent were employed in 

construction. Regarding occupations, the percentage of independent 

contractors in sales and related occupations (17 percent) and management 

(16 percent) were greater than in other occupations. In 2005, 9 percent of 

independent contractors indicated that they would prefer to work for 

someone else. About 11 percent of independent contractors reported 

family income below $20,000. 

The tests used to determine whether a worker is an independent 

contractor or an employee are complex, subjective, and differ from law to 

law. Nevertheless, when employees are misclassified as independent 

contractors, they may be excluded from coverage under key laws designed 

to protect workers and may not have access to certain employer-provided

benefits, such as health insurance coverage and pension plans. Moreover, 

misclassification of employees can affect the administration of many 

federal and state programs. For example, misclassification could affect 

payment of taxes and payments into state workers’ compensation and 

unemployment insurance programs. 

Number and 

Characteristics of 

Independent 

Contractors 

Misclassification of 

Employees Can Have 

Negative Outcomes 

for Workers and 

Government 

Programs 

Page 5 GAO-07-859T 
No definitive test exists to distinguish whether a worker is an employee or

an independent contractor. The tests used to determine whether a worker 

is an independent contractor or an employee are complex, subjective, and

differ from law to law. For example, the National Labor Relations Act, the 

Civil Rights Act, the Fair Labor Standards Act, and the Employee 

Retirement Income Security Act each use a different definition of an 

employee and various tests, or criteria, to distinguish independent 

contractors from employees. 

There Is Neither a Single 

or Simple Test Used to 

Determine whether a 

Worker Is an Independent 

Contractor or an Employee 

In determining whether an employment relationship exists under federal 

statutes, courts have developed several criteria. These criteria have been 

classified as the economic realities test, the common law test, and a 

combination of the two sometimes referred to as a hybrid test. The 

economic realities test looks to whether the worker is economically 

dependent upon the principal or is in business for him or herself. The test 

is not precise, leaving determinations to be made on a case-by-case basis. 

The test consists of a number of factors, such as the degree of control 

exercised by the employing party over the worker, the worker’s 

opportunity for profit or loss, the worker’s capital investment in the 

business, the degree of skill required for the job, and whether the worker 

is an integral part of the business. The traditional common law test 

examines the employing party’s right to control how the work is 

performed. To determine whether the employing party has this right, 

courts may consider the degree of skill required to perform the work, who 

supplies the tools and equipment needed to perform the work, and the 

length of time the worker has been working for the employing party. When 

the tests are combined in some type of hybrid, a court typically weighs the

common law factors and some additional factors related to the worker’s 

economic situation, such as how the work relationship may be terminated, 

whether the worker receives leave and retirement benefits, and whether 

the hiring party pays Social Security taxes. 

Aside from the complexities of distinguishing employees from

independent contractors, employers have economic incentives to 

misclassify employees as independent contractors. Namely, employers are 

not obligated to make certain financial expenditures for independent 

contractors that they make for employees, such as paying certain taxes 

(Social Security, Medicare, and unemployment taxes), providing workers’ 

compensation insurance, paying minimum wage and overtime wages, or 

including independent contractors in employee benefit plans. 

Page 6 GAO-07-859T 
Contingent workers who are employees are generally protected under key 

laws designed to protect workers, but certain categories of contingent 

workers—such as independent contractors—may be excluded from 

coverage under these laws. While most of the key worker protection laws

do not distinguish between types of employees (i.e., contingent and 

standard full-time employees), some laws contain requirements that 

exclude certain categories of contingent workers or contain certain timein-service requirements that make it difficult for them to be covered. In 

addition, because these laws are based on the traditional employeremployee relationship, they generally cover only workers who are 

employees; independent contractors, therefore, are not covered. 

Misclassified Employees 

May Be Excluded from 

Coverage under Key 

Worker Protection Laws 

Some of the key laws designed to protect workers but that only apply to 

“employees” include the following: 

• Fair Labor Standards Act—establishes minimum wage, overtime, 

and child labor standards; 

• Family and Medical Leave Act—requires employers to allow 

employees to take up to 12 weeks of unpaid, job-protected leave for 

medical reasons related to a family member’s or the employee’s 

own health;

• Occupational Safety and Health Act—requires employers to 

maintain a safe and healthy workplace for their employees and 

requires employers and employees to comply with all federal

occupational health and safety standards; 

• National Labor Relations Act—guarantees the right of employees to 

organize and bargain collectively; 

• Unemployment Insurance—pays benefits to workers in covered 

jobs who become unemployed and meet state-established eligibility 

rules; and 

• Workers’ Compensation—provides benefits to injured workers 

while limiting employers’ liability strictly to workers’ compensation 

payments. 

When employers have misclassified workers as independent contractors, 

workers may need to go to court to establish their employee status and 

their eligibility for protection under the laws. In addition, DOL may bring a 

lawsuit on behalf of the worker or group of workers to require that the 

employer provide the benefit or protection under the law. 

Page 7 GAO-07-859T 
Employees who are misclassified as independent contractors, because by 

definition they would not be considered employees, may not have access 

to certain employer-provided benefits, such as health insurance coverage 

and pension plans. Some states and professional associations have 

developed health insurance programs that help contingent workers access 

health care. While these public and private initiatives are relatively new 

and long-term outcomes have yet to be determined, the programs have 

succeeded in expanding health insurance options for some contingent 

workers. 

Misclassification of employees can affect the administration of many 

federal and state programs, such as payment of taxes and pension 

benefits. For example, if employers misclassify workers as independent

contractors, then they may not be paying the payroll taxes required to be 

paid for employees. At the federal level, misclassification can reduce tax

payments, Medicare payments, and Social Security payments. At the state

level, misclassification can affect payments into state tax, workers’ 

compensation, and unemployment insurance programs. 

DOL detects and addresses employee misclassification when enforcing the 

FLSA minimum wage and overtime pay provisions. As part of its FLSA 

investigation process, DOL examines the employment relationship—

whether a worker is an employee or an independent contractor—to 

determine which workers are covered. Investigators use various methods 

to test the employment relationship of workers, including interviewing 

employers and workers, reviewing payroll and related documents, and 

touring work sites. While misclassification alone is not an FLSA violation,

it may contribute to FLSA violations or violations of other laws, such as 

tax violations. DOL’s outreach efforts provide some information to 

employers and workers on employee misclassification issues. DOL 

procedures require officials to share information with other federal and

state agencies whenever investigators find possible violations of other 

laws. However, the district offices that we contacted vary in how often 

they forward misclassification cases as a possible violation of other 

agencies’ laws. 

Misclassified Employees 

May Not Have Access to 

Some Employer-Provided 

Benefits 

Employee 

Misclassification Can 

Affect Administration of 

Government Programs 

DOL Detects and 

Addresses Employee 

Misclassification 

Through 

Investigations, but 

Offices We Studied 

Vary in How Often 

They Forward 

Misclassification 

Cases to Other 

Federal and State 

Agencies 

Page 8 GAO-07-859T 
DOL relies on complaints as a primary way to identify potential violations 

for investigation. All FLSA investigations of minimum wage and overtime 

pay complaints begin with an examination of workers’ employment 

relationship because FLSA applies only to employees, not to independent

contractors. If investigators determine that a worker is an employee and 

not an independent contractor, they continue with their FLSA 

investigation to determine whether the employer has provided the 

minimum wage and overtime pay required by the act. 

Employee misclassification alone is not a violation of FLSA, but may 

contribute to FSLA minimum wage and overtime pay violations or 

violations of tax, workers’ compensation, or unemployment insurance 

laws. DOL investigations have identified FLSA violations associated with

employee misclassification. For example, one misclassification case 

involved a valet parking company located in Arizona that provided 

services to local restaurants, sports venues, hotels, and theaters. In 2004, 

this company paid $66,947 in minimum wage and overtime pay back wages 

to 262 employees who had been misclassified as independent contractors. 

When reviewing the employment relationship, the DOL investigator found 

that the services provided by these workers were integral to the business, 

and that the employer had imposed strict policies and procedures to 

follow, and told them when they would work, where they would work, 

what their pay rate would be, and what uniforms they would wear. The 

investigator determined that the workers were not required to use 

initiative, judgment, or foresight to be successful as independent 

contractors, did not have any investment in facilities or equipment, and 

were not operating to make a profit.

Investigators Determine 

Workers’ Employment 

Relationship 

Employee 

Misclassification, though 

Not an FLSA Violation, 

May Contribute to FLSA or 

Other Violations 

DOL’s Outreach Efforts 

Provide Some Information 

on Employee 

Misclassification Issues 

As part of general FLSA outreach efforts to employers and workers, DOL 

provides some information on establishing the employment relationship. 

While these outreach efforts primarily focus on how to comply with 

provisions of FLSA—minimum wage, overtime pay, and child labor—they 

also include some information on the employment relationship. 

Specifically, information on employment relationship issues is available to 

employers and workers through brochures, pamphlets, fact sheets, and 

Web-based information. According to DOL officials, outreach efforts 

conducted specifically for industries likely to use independent contractors 

may also address the topic of employee misclassification. 

Another form of outreach that DOL provides is its workplace poster. FLSA 

regulations require that every employer that has employees subject to the

Page 9 GAO-07-859T 
act’s provisions post a notice explaining the act in a prominent and 

accessible place at the work site. While DOL relies heavily on complaints 

from workers to enforce FLSA, the FLSA workplace poster does not 

provide a telephone number for workers or others to call to register 

complaints. 

Employers’ misclassification of workers as independent contractors may 

in some circumstances violate tax, unemployment insurance, and workers’ 

compensation laws. According to the Field Operations Handbook, DOL 

regional or district officials are required to share information with other 

appropriate federal and state agencies whenever investigators conducting

FLSA investigations find instances of possible violations of other laws. At 

the same time, however, the handbook cautions investigators not to 

interpret laws outside their authority. We discussed whether DOL 

forwards misclassification cases identified during an FLSA investigation. 

The DOL officials we spoke to in nine district offices could not provide the 

number of misclassification cases they referred to other agencies because 

they do not track this information. However, their responses indicated that 

district offices vary in how often they implement the procedures to refer 

cases to other agencies. Some of the DOL district offices told us that they 

notified IRS and state agencies when they found misclassification, while 

others told us that they had little or no contact with other agencies 

regarding misclassification issues. These district offices also reported that

it was rare for them to receive misclassification referrals from other 

federal or state agencies. 

DOL investigators identify instances of employee misclassification when 

responding to minimum wage and overtime pay complaints. However, 

because the FLSA workplace poster does not provide an easy method for 

workers to report complaints, DOL may be missing opportunities to 

address other instances of potential misclassification. Improving the 

workplace poster would reinforce DOL’s complaint-based strategy and 

would help further protect the wages of employees who may be 

misclassified. 

DOL Offices We Studied 

Vary in How Often They 

Forward Misclassification 

Cases to Other Federal and 

State Agencies 

Conclusions and 

Recommendations for 

Executive Action 

While DOL investigators conducting FLSA investigations are required to 

share information with other federal and state agencies whenever they

find instances of possible violations of other laws, DOL district offices we 

studied varied in how often they forwarded misclassification cases to 

other agencies. DOL does not know the extent to which district offices 

refer misclassification cases to other agencies. DOL cautions investigators 

Page 10 GAO-07-859T 
not to interpret laws outside their authority, but referring misclassification 

cases identified through FLSA investigations would not require DOL to 

interpret other agencies’ laws. In addition, referring this information may 

assist other federal and state agencies in addressing misclassification. 

Furthermore, when DOL does not refer cases of misclassification, other 

agencies lose opportunities to fulfill their fiduciary duties in conserving 

government funds. 

To facilitate the reporting of FLSA complaints, we recommended that the 

Secretary of Labor instruct the Wage and Hour Division to revise the FLSA

workplace poster to include national, regional, and district office 

telephone numbers and a Web site address that complainants may use to 

report alleged employee misclassification issues. Following the 

publication of our report, DOL notified the Congress that it was 

redesigning the poster and expected the work to be completed in spring 

2007. 

To facilitate addressing employee misclassification across federal and 

state programs, we recommended that the Secretary of Labor instruct the 

Wage and Hour Division to evaluate the extent to which misclassification 

cases identified through FLSA investigations are referred to the 

appropriate federal or state agency potentially affected by employee 

misclassification, and take action to make improvements as necessary. In

addressing its referral mechanism, the Wage and Hour Division officials 

should consider building upon efforts by district offices currently engaging 

in referrals. Following the publication of our report, DOL notified the 

Congress that it was researching the nature and effectiveness of the 

referral of potential employee misclassification by different district offices 

to various federal and state agencies. DOL also noted that it will consider 

appropriate revisions to its procedures, and expected the work to be done 

by the end of September 2007. 

Mr. Chairmen, this concludes my prepared statement. I will be happy to 

answer any questions that you or other members of the subcommittees 

may have. 

Page 11 GAO-07-859T 
For future information regarding this testimony, I can be contacted at 

(202) 512-7215. Key contributors to this testimony were Brett Fallavollita 

and Linda Siegel. 

Page 12 GAO-07-859T 

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