On July 29, 2015, Senators Bob Casey (D-PA) and Al Franken (D-MN) introduced the Payroll Fraud Prevention Act of 2015. The Act would significantly amend the Fair Labor Standards Act to require employers to designate employees from non-employee independent contractors and impose additional reporting requirements and substantial penalties for non-compliance.
In addition to reporting requirements, the Act would require employers to provide written notice to workers of their classification as an employee or non-employee. Failure to provide such notice to any covered worker would automatically render the individual an employee, an assumption that could be rebutted only “through the presentation of clear and convincing evidence that a covered individual … is not an employee.”
The bill also includes provisions preventing an employer from firing or otherwise retaliating against an individual who pursues his or her rights under the Act. Employers could face up to $1,100 in civil penalties for each misclassification, or up to $5,000 if such violation is deemed repeated or willful. Finally, the bill directs the DOL’s Wage and Hour Division to conduct targeted audits of industries having a high rate of worker misclassification.
While this bill is unlikely to advance in Congress, it is another example of the heightened scrutiny being paid to independent contractor relationships. The Department of Labor’s Wage and Hour Division has long stated its goal to develop and implement a “Right-to-Know“ rule, which would “update the recordkeeping regulations under the Fair Labor Standards Act in order to enhance the transparency and disclosure to workers of their status as the employer’s employee or some other status, such as an independent contractor, and if an employee, how their pay is computed.” That said, the Administration has established a “middle-class economics” narrative that will serve as an election platform for many Congressional Democrats in the months ahead. The success of that narrative will likely influence the success of the Payroll Fraud Prevention Act, or other employment status transparency measures similar to it.