Congress Takes Aim at Independent Contractor Misclassification Through New Legislation

By Anthony M. Hohn

On April 22, the U.S. Senate and House of Representatives introduced identical legislation aimed at curtailing and preventing misclassification of workers by employers. The Employee Misclassification Prevention Act (EMPA) would amend the Fair Labor Standards Act (FLSA) by requiring employers to maintain certain records for both employees and independent contractors in an effort to more effectively prevent employers from improperly classifying employees as independent contractors.

There are several provisions of EMPA which could significantly impact employers. First, the legislation would mandate that employers provide written notice to each worker informing the worker of his or her status as either an employee or an independent contractor. In addition, employers would have to maintain records—akin to wage and hour records maintained for employees—for each independent contractor working with the employer.

In addition, EMPA would create stiff civil penalties for classification violations. Specifically, an employer could be fined up to $1,100 per violation for its first offense, and up to $5,000 for repeat or willful violations. Further, “willful” violators of the misclassification provisions could face triple damages. The legislation would also expand the FLSA’s anti-retaliation provision to cover workers who have been discriminated against after seeking to be accurately classified by their employers.

If passed, employers would have six months from the effective date of the legislation to notify current workers of their classification. Future workers would have to be notified of their status at the time of hire. Failing to comply with these notice requirements would have a significant impact on any future wage and hour litigation, as workers are then presumed to be employees unless the employer can prove by clear and convincing evidence that the worker is, indeed, an independent contractor.

While EMPA is not yet in effect, employers must be cognizant of the increased focus on policing misclassification of workers. Along with the obvious legal ramifications, misclassification issues can prove to be quite costly and detrimental to an employer’s business.