Enter the latest wave in the sea of crackdowns, regulations and additional paperwork surrounding the classification (or misclassification) of employees.
Congress just got its hands on the latest version of the Employee Misclassification Prevention Act. If passed, it’ll create a slew of new Fair Labor Standards Act (FLSA) responsibilities for employers.
It’s a reworked (but very similar) version of legislation that was introduced to Congress last year under the same name. It also mirrors the Payroll Fraud and Prevention Act, which was brought before Congress earlier this year.
Both previous bills languished in Congress as lawmakers tackled more pressing legislative measures.
The new Employee Misclassification Prevention Act would make misclassifying employees as independent contractors a federal offense — whether the mistake is intentional or not.
It would also:
- Require every employer, within six months of enactment, to provide written notices to every worker who performs labor or services for it informing them whether they have been classified as an employee or “non-employee” (independent contractor) — and why they have been classified as such
- Mandate that employers direct all workers to a Department of Labor (DOL) website, which would inform employees of their rights and encourage them to contact the DOL if they suspect they’ve been misclassified
- Require employers to keep records of the hours, work and wages of employees and “non-employees” for the purpose of backing up workers’ classifications
- Impose penalties upon employers of $1,100 per worker for first-time violations and $5,000 per worker for repeat or “willful” violations.
- Make it illegal for employers to discriminate or retaliate against workers who exercise their rights under the bill
- Allow the DOL and Internal Revenue Service (IRS) to share information on cases where employers misclassify workers
- Amend the Social Security Act to create penalties for misclassifying employees — or paying unreported wages to employees — for unemployment compensation purposes
- Direct the DOL to perform audits on employers in industries that frequently misclassify workers, and
- Direct state unemployment agencies to conduct audits to identify employers who are misclassifying employees.
The reintroduction of this legislation comes on the heels of two new worker classification initiatives launched by the feds:
- A partnership between the IRS, DOL and several states to share information on employers that misclassify workers as independent contractors or deny employees minimum wage and overtime pay — and possibly seek multiple fines, and
- The IRS’ new Voluntary Classification Settlement Program (VCSP), which allows employers to resolve past worker classification issues — while only paying a fraction of back payroll taxes owed.