On the heels of stepped-up Labor Dept. audits, Congress introduced a bill to punish employers that misclassify workers and, as a result, fail to pay legally mandated overtime.
The Employee Misclassification Prevention Act would amend the Fair Labor Standards Act to require employers to keep records on and notify workers of their employment or independent contractor classification and their right to challenge that classification. In addition, the measure would do the following:
- Establish recordkeeping requirements for contract workers. The big change: If you don’t keep the records, contract employees will be presumed to be full-time employees of the company, making the employer liable for payroll deduction, overtime pay and other responsibilities
- Require employers to notify their workers and independent contractors of their appropriate classification. Such notice would include a statement directing the worker to a Department of Labor website. Essentially, the law would require employers to educate workers on their rights
- Prevent an employer from discriminating or retaliating against workers who exercise their rights under the bill
- Impose employer penalties of up to $1,100 per employee for first offenders and $5,000 per employee for repeat or willful violations
- Allow the DOL and the IRS to share information on cases where employers misclassify workers
- Direct the DOL to perform targeted audits focusing on employers in industries that frequently misclassify employees
- Amend the Social Security Act to establish administrative penalties for misclassifying employees, or paying unreported wages to employees without proper recordkeeping, for unemployment compensation purposes
- Mandate state unemployment insurance agencies to conduct audits to identify employers who are misclassifying employees, and
- Track and monitor states’ effectiveness in identifying employers who misclassify employees.
This latest bill turns up the heat on misclassification. A similar bill – the Payroll Fraud Prevention Act – was introduced in the Senate in April. And last July the House Subcommittee on Workforce Protections held a hearing on whether the FLSA needs to be revised to address worker misclassification, among other related issues.