Thursday, December 5, 2013

New Bill Regarding Independent Contractors



A bill has been introduced in the US Senate, which, if passed, will attempt to reduce the instances of misclassification of workers as “independent contractors” when they should be classified as “employees.” These misclassifications have been under intense scrutiny during recent years. The US Department of Labor website, http://www.dol.gov/whd/workers/misclassification, says that “misclassified employees are often denied access to critical benefits and protections – such as family and medical leave, overtime, minimum wage and unemployment insurance – to which they are entitled. Employee misclassification also generates substantial losses to the Treasure and the Social Security and Medicare funds, as well as to state unemployment insurance and workers compensation funds.”

This bill proposes several requirements regarding the use of independent contractors:
  1. All employers would be required to issue notices to all employees, as well as independent contractors, detailing the following information:
    1. How that employee or independent contractor is classified by the employer.
    2. Information letting the individual know that they should contact the Department of Labor (DOL) if they feel they have been misclassified in some way.
    3. A link to the website for the Department of Labor (DOL).
  2. The notices would have to be issued by a specific date, which would be determined prior to the passage of the bill.
  3. Any employee or independent contractor who does not receive a copy of the notice within the prescribed timeframe would be assumed to be an employee with all the appropriate benefits.
  4. It would require convincing evidence that the nature of the job does not qualify as an employee to overturn this presumption that the individual is an employee.
  5. Violations include civil penalties of up to $1,100 per misclassified individual and for repeated or willful violations up to $5,000 per misclassified individual.
Those are some pretty hefty monetary penalties especially if an employer has multiple misclassified employees. It’s very important to take a look at this issue because as stated earlier, this is being scrutinized even without the passage of this bill.

Give us a call at 916-576-7050 if you would like to discuss the implications of the bill further.

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