HR Manager’s Remarks Regarding Nature of Hiring Process May Help Employee Establish Discrimination Case
Written by Alexandra D. Thayer (posted by Martha Zackin)
On November 12, the Payroll Fraud Prevention Act of 2013 (S. 1687) was introduced in the United States Senate. The bill, which would amend the Fair Labor Standards Act, seeks to impose new rules and penalties relating to misclassification of employees as independent contractors. The changes would apply to all entities covered by the FLSA, including those that do not use independent contractors or other “non-employees.”
Although the Payroll Fraud Prevention Act would not prohibit the use of properly classified independent contractors, the bill would make it unlawful to “wrongly classify an employee . . . as a non-employee,” even if the misclassification is unintentional and made in a good faith attempt to comply with the law. If passed as currently written, the bill would:
- Impose treble damages for misclassification when the misclassification is combined with a violation of the minimum wage or overtime pay requirements of the FLSA;
- Require every entity covered by the FLSA issue a classification notice to all workers, informing them of their status as an “employee” or “non-employee,” and directing them to the Department of Labor for guidance. Failure to provide the required notice would result in penalties of up to $1,100 for each individual who did not receive notice. This penalty would increase to up to $5,000 per individual for a second offense or a willful violation;
- Authorize the Secretary of Labor to report misclassification information to the IRS, impose additional penalties upon employers that misclassify employees for unemployment compensation purposes, and conduct targeted audits within certain industries.
The issue of misclassification continues to be front and center for many lawmakers and regulators at both the state and federal levels. Bills similar to the Payroll Fraud Prevention Act of 2013 have been repeatedly introduced in Congress since 2010, and numerous states have recently passed or introduced legislation specifically addressing misclassification. The IRS and DOL are also actively pursuing employers in industries in which misclassification is viewed as prevalent.
Although in the current atmosphere of partisan gridlock on Capitol Hill the proposed bill is likely to face significant push-back, the issue of “misclassification” has been in the forefront for lawmakers and regulators in recent years and is unlikely to go away soon. The broad scope of S. 1687 means employers will be well served to stay on top of this legislation should it move forward through Congress.