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Cleanlink News 5/6/2011

New ‘Payroll Fraud’ Bill Targets Worker Misclassification


Congress was recenlty presented a bill that might increase businesses FLSA (Fair Labor Standards Act) responsibilities. According to reporting from GovTrack.us, the bill is called the Payroll Fraud Prevention Act and it would expand the FLSA, similar to the Employee Misclassification Prevention Act that hit Congress a year ago.

Reportidly, the new bill would:
• Require employers to keep records that accurately state whether each worker performing labor or services is an employee or non-employee (like an independent contractor) — and why.
• Require employers to notify workers of their classification as an employee or non-employee — while directing them to a Department of Labor (DOL) website containing info about the rights of employees, and telling them to contact the DOL if they suspect they have been misclassified.
• Create penalties of up to $5,000 per worker for a violation of the notice requirements or for misclassifying an employee as a non-employee.
• Impose triple damages for willful violations of the minimum wage or overtime laws when an employer has misclassified a worker.
• Direct the secretary of labor to establish a website designed to inform workers about their federal and state wage and hour rights.
• Direct the DOL to conduct audits targeting industries with high rates of misclassification.

According to the bill’s sponsors, misclassification in an attempt to avoid tax obligations is a form of “payroll fraud.” Supporters say the purpose of the bill is to eliminate the “tax gap” that’s created when employers misclassify workers — allowing those employers to skip out on paying certain federal, state and local taxes.

Click here for more information on this bill.


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