House Bill Would Penalize Employee Misclassification

Two Democrats in Congress have introduced a bill to crack down on the practice by some employers of classifying workers improperly as independent contractors in order to pay them less. "Employers who misclassify their employees as independent contractors rob workers of needed pay and benefits and cost government at all levels substantial uncollected revenues," said U.S. Rep. Lynn Woolsey, D-Calif., who chairs the Subcommittee on Workforce Protections. "Despite, this enormous problem, the Department of Labor has failed not only to crack down on this practice by enforcing current laws, but has failed to coordinate with other agencies to address the issue."

"The egregious practice of misclassifying workers as independent contractors needs to end," said the other sponsor, U.S. Rep. Rob Andrews, D-N.J., who chairs the Subcommittee on Health, Employment, Labor and Pensions. "The Employee Misclassification Prevention Act is pro-employee, pro-employer, and pro-taxpayer. The bill will protect employee benefits, remove incentives for employers to misclassify their workers, and ensure that bad employers don't line their own pockets with unpaid payroll taxes."

Full-time employees who are misclassified as independent contractors lose workers' compensation coverage, minimum wage and overtime protections, and family and medical leave. The Government Accountability Office says more than 10 million workers in the U.S. are classified as independent contractors, and a Massachusetts study found 11.4 percent of that state's construction workers had been misclassified as independent contractors between 2001 and 2003, according to the two legislators. The bill, the Employee Misclassification Prevention Act of 2008 (H.R. 6111), would impose penalties on employers who misclassify employees as independent contractors; make employers keep records on and notify workers of their employment or independent contractor classification and their right to challenge that classification; require state unemployment insurance agencies to conduct audits to identify employers who are misclassifying employees; monitor states' effectiveness in identifying employers who misclassify employees; allow the U.S. Department of Labor and the Internal Revenue Service to share information on cases where employers misclassify workers; and require DOL to perform targeted audits focusing on employers in industries that frequently misclassify employees.

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