Over the last several years, members of Congress (including U.S. Sen. Bob Casey, D-Pennsylvania) have introduced and reintroduced the Payroll Fraud Prevention Act, designed to target employers that intentionally misclassify employees as independent contractors. If passed, the law would amend the Fair Labor Standards Act to mandate that businesses provide notice to all individuals of whether they are classified as an “employee” or “non-employee” and to subject businesses to civil penalties for each instance in which they violate the law. More importantly, however, the law would permit the Department of Labor to conduct targeted audits of industries “with frequent incidence” of misclassification and would authorize the DOL to report misclassification incidents to the Internal Revenue Service.
Although the proposed law has not yet been the subject of a vote in either the U.S. Senate or the U.S. House of Representatives, the DOL’s “Key Enforcement Initiatives,” released in February, list “Addressing the Fissured Workforce” (which is a synonym for independent contractor misclassification) as the first initiative. Considering the DOL’s recent history—which includes recovery of more than $1.3 billion in back wages for individuals since 2009—employers that use independent contractors in the construction, home health care, staffing, transportation, security, hospitality, custodial and medical industries (to name only a few) should be extremely diligent in their classification of contractors, as the DOL has indicated it will focus on these industries. As the federal government and plaintiffs attorneys increase the focus on how businesses pay and classify their workforces, businesses must be diligent in confirming that independent contractors are not actually employees.
