CONGRESS CONSIDERING NEW WORKER CLASSIFICATION PENALTIES

Businesses using independent contractors as part of their workforce should pay careful attention to a new bill, called the Payroll Fraud Prevention Act of 2013 (S. 1687) introduced in the Senate last month.  The bill is aimed at creating further disincentives to misclassification of employees as independent contractors. The bill is almost identical to an earlier version introduced, but not passed in 2011.  Though rhetoric from bill sponsors suggests it attempts to target only “intentional misclassifications” of employees, the language of the bill could reach even unintentional misclassifications.    Principal components of the bill would create a new federal labor offense for misclassification of employees as independent contractors, expanding the Fair Labor Standards Act to cover a new category of non-employees.  Part of the implementation scheme under the new bill would require businesses to provide their “non-employees” and their employees an individual classification notice, telling them how they have been classified, directing them to the U.S. Department of Labor web site for  more information about their rights, and suggesting that the employee or non-employee contact the Department of Labor if they suspect they have been misclassified.