Connecticut Congressman Sponsors “Payroll Fraud Prevention Act”

Readers of this blog will be aware that the misclassification of employees as independent contractors has been a major concern of state and federal authorities for several years. Employers don’t provide workers compensation insurance for independent contractors, they’re not eligible for unemployment compensation benefits, and they’re not paid overtime if they work more than 40 hours in a workweek. Depending on your perspective, these facts represent either cost savings or “wage theft.” Departments of Labor at both the federal and state levels have been on a campaign to encourage employers to classify their employees correctly.

Against this backdrop, it’s somewhat anomalous that misclassification of employees as independent contractors doesn’t in itself violate the federal Fair Labor Standards Act. Democratic Congressman Joe Courtney of Connecticut’s 2d District is a co-sponsor of the “Payroll Fraud Prevention Act of 2014,”which would expand the FLSA’s coverage to define a new category of workers referred to as “non-employees,” and would make it a new offense to misclassify employees and non-employees. The Act authorizes the DoL to impose a fine of up to $5000 per worker for each violation.

The proposed statute would also require employers to notify their workers of how they have been classified, direct them to a U.S. DoL website for further information, and advise them to contact the DoL if they suspect the employer has classified them incorrectly. The law would also permit misclassified workers to collect triple damages for minimum wage or overtime violations.

Similar statutes were proposed in the Senate in 2011 and 2013. It seems unlikely that the current proposal will make it through the Republican-controlled House.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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