Legislation Seeks to Curb Employee Misclassification via Fines, Notice Rules

Adding momentum to federal agencies’ ongoing initiatives to crack down on employee misclassification, the U.S. House and Senate have introduced legislation intended to curtail the misclassification of employees as independent contractors. The Employee Misclassification Prevention Act, introduced April 22, would amend the Fair Labor Standards Act (FLSA) to impose additional compliance and record-keeping requirements on employers and to specifically prohibit the misclassification of employees.

Under the Act, employers would have to provide written notice of classification to each individual hired alerting the employee (or contractor) of her particular status. Employers also would be required to keep records, similar to the work and wage records kept for employees, for each contractor hired.

Similar legislation was introduced in the last Congress, with cosponsorship from then-Senator Barack Obama. The previous legislation stalled in committee, however, leading some states such as New York, Delaware, and Pennsylvania to try to pass misclassification prevention legislation of their own. Less opposition is expected this time around.

Employers would have six months from the bill’s effective date to notify current employees/contractors of their classification, and then future workers would be informed of their status at the time of hire. If employers failed to comply with these notice requirements, workers would be presumed to be employees unless the employer showed clear and convincing contrary evidence.

The Act also includes antiretaliation provisions and sets civil penalties of up to $5,000 per violation for employers that don’t comply with the notice and record-keeping requirements as well as for employers that misclassify employees. Willful violations of the FLSA that occur via the misclassification of employees would be subject to triple damages.

The U.S. Department of Labor (DOL) has spent millions to hire new Wage and Hour Division (WHD) investigators to target employee misclassifications. Make sure you know the difference between an independent contractor and an employee — or DOL investigators will do it for you.

Learn what employers can expect from the DOL’s new misclassification initiative and how to ensure your employees and contractors are properly classified by participating in the all-new HR Hero audio conference “Independent Contractor or Employee? Avoid the Misclassification Crackdown” on Thursday, April 29.

Uncover payroll policy problems, avoid crushing overtime designation errors, correctly apply the FLSA at your workplace, and remain the go-to expert with Wage & Hour Compliance: Practical Solutions for HR. This desk reference provides you with detailed guidance on how to comply with the FLSA and takes you through the most complicated wage and hour issues HR practitioners encounter.