The hits just keep on coming: Congress is considering another measure designed to crack down on companies that classify workers as independent contractors.
The Fair Playing Field Act (FPFA) was recently introduced in both houses.
In a nutshell, the bill removes a loophole in IRS regs — Section 530 of the Revenue Act of 1978 — that allows businesses to classify workers as independent contractors if the company has “a reasonable basis” for the classification and reports contractors’ compensation on Form 1099s.
The FPFA would also:
- eliminate current reduced penalties for failure to deduct and withhold income taxes and the employee’s share of FICA taxes
- require employers to provide each of their independent contractors with a written statement of the contractor’s federal tax obligations, the labor and employment law protections that do not apply to independent contractors, and the right of the independent contractor to seek a status determination from the IRS,
- require the Secretary of the Treasury to issue annual reports on worker misclassification, and
- requires the feds to issue new rules on how workers may be classified as independent contractors.
For a look at the bill, go here.
Another proposal pending
Congress is also considering the Employee Misclassification Prevention Act (EMPA), which was introduced last spring.
Instead of aiming at tax regs, EMPA would amend the Fair Labor Standards Act (FLSA). That bill would:
- establish a new type of labor law offense — misclassification of an employee as an independent contractor
- impose strict recordkeeping and notice rules on firms that use independent contractors, and
- set up new fines and penalties for violations.
For a look at the full bill, go here.