Proposed Federal Legislation Targets Misclassified Workers

Senator Sherrod Brown (D-OH) and Rep. Lynn Woolsey (D-CA) have introduced identical legislation in both the U.S. Senate and the House of Representatives that would target worker misclassification. The legislation is called the "Employee Misclassification Prevention Act" (EMPA, H.R. 5107) and it would require businesses to maintain certain records (see 29 USC 211(c) - Collection of Data below) for both employees and non-employees (i.e., independent contractors). Businesses would also be required to provide written notification to each of their workers regarding the company's classification of the worker as either an employee or independent contractor. For purposes of the EMPA, it would be presumed that a worker is an employee if a business did not maintain the records or provide the notification discussed above.

The legislation provides for penalties against employers who violate the minimum wage and overtime provisions in the Fair Labor Standards Act (FLSA) on work performed by independent contractors. In addition, employers who misclassify workers as independent contractors would be subject to civil penalties of up to $1,100 per employee for first offenders, and $5,000 per employee for repeat or willful violations.

The legislation would create an "employee rights" webpage on the Department of Labor (DOL) website to inform workers of their federal and state wage and hour rights. In addition, state unemployment insurance agencies would be allowed to conduct auditing and investigative procedures as may be necessary to identify employers that have not registered under state law, or that are paying unreported wages, where these actions or omissions have the effect of excluding employees from unemployment compensation coverage. The DOL would be allowed to audit certain industries that have frequently misclassified employees as independent contractors.

DOL Secretary Hilda L. Solis recently issued the following statement on the legislation: "I applaud Sen. Brown and Rep. Woolsey for their efforts to address this significant and troubling issue. One of my goals as secretary of labor is to secure minimum and overtime wages and to help middle class families remain in the middle class. Working on the issue of misclassification is key to attaining those goals because misclassification of employees as independent contractors deprives employees of critical workplace protections and employment benefits to which they are legally entitled" [DOL Wage Hour Division News Release No. 10-0541-NAT, 4/22/10]

29 USC 211 - Collection of Data
(a) Investigations and inspections
The Administrator or his designated representatives may investigate and gather data regarding the wages, hours, and other conditions and practices of employment in any industry subject to this chapter, and may enter and inspect such places and such records (and make such transcriptions thereof), question such employees, and investigate such facts, conditions, practices, or matters as he may deem necessary or appropriate to determine whether any person has violated any provision of this chapter, or which may aid in the enforcement of the provisions of this chapter. Except as provided in section 212 of this title and in subsection (b) of this section, the Administrator shall utilize the bureaus and divisions of the Department of Labor for all the investigations and inspections necessary under this section. Except as provided in section 212 of this title, the Administrator shall bring all actions under section 217 of this title to restrain violations of this chapter.

(b) State and local agencies and employees 
With the consent and cooperation of State agencies charged with the administration of State labor laws, the Administrator and the Secretary of Labor may, for the purpose of carrying out their respective functions and duties under this chapter, utilize the services of State and local agencies and their employees and, notwithstanding any other provision of law, may reimburse such State and local agencies and their employees for services rendered for such purposes.

(c) Records
Every employer subject to any provision of this chapter or of any order issued under this chapter shall make, keep, and preserve such records of the persons employed by him and of the wages, hours, and other conditions and practices of employment maintained by him, and shall preserve such records for such periods of time, and shall make such reports therefrom to the Administrator as he shall prescribe by regulation or order as necessary or appropriate for the enforcement of the provisions of this chapter or the regulations or orders thereunder. The employer of an employee who performs substitute work described in section 207 (p)(3) of this title may not be required under this subsection to keep a record of the hours of the substitute work.
(d) Homework regulations
The Administrator is authorized to make such regulations and orders regulating, restricting, or prohibiting industrial homework as are necessary or appropriate to prevent the circumvention or evasion of and to safeguard the minimum wage rate prescribed in this chapter, and all existing regulations or orders of the Administrator relating to industrial homework are continued in full force and effect.