Today, Rep. Lynn Woolsey (D-CA) introduced a bill to end the misclassification of employees as independent contractors, a practice that strips workers of benefits and protections, puts responsible employers at a competitive disadvantage, and cheats taxpayers.
"Misclassification undermines workers' rights by denying them access to important benefits and protections like workers' compensation coverage, minimum wage and overtime protections, family and medical leave, and the right to organize and collectively bargain. This unscrupulous practice has gone unchecked long enough," Rep. Woolsey said. "Ending misclassification is an important step toward paying down the national debt, empowering American workers and invigorating the national economy."
Rep. Woolsey joined with her colleagues Rep. Rob Andrews (D-NJ) and Rep. George Miller (D-CA) to reintroduce H.R. 3178, the Employee Misclassification Prevention Act. This bill was also included among recommendations sent yesterday by the Democratic Members of the House Committee on Education and the Workforce to the Joint Committee on Deficit Reduction (the "Super Committee"), which is charged with identifying trillions in federal savings.
"Misclassification is fundamentally unfair to our nation's law-abiding employers, and unfair to the countless workers who are unlawfully stripped of basic protections like minimum wage, overtime, and the right to organize. Strengthening the law to prevent misclassification will level the playing field for those that follow the law and help to close an estimated $54 billion federal tax gap resulting from this illegal activity," said Rep. Miller.
"The egregious practice of misclassifying workers as independent contractors needs to end because it is harming working families and putting responsible, law-abiding employers at a competitive disadvantage," said Rep. Andrews. "We need to make certain that bad employers can no longer line their own pockets with unpaid payroll taxes. This legislation not only puts fair standards in place to remove incentives for misclassification, but it ensures that working Americans are given the rights they deserve and taxpayers are not being taken advantage of at a time when our country can least afford it."
The IRS has estimated that misclassification deprives the federal treasury of about $2.7 billion a year in unpaid tax revenue. According to the General Accountability Office (GAO), the misclassification of employees is widespread; at least 10 million workers in the U.S. are classified, rightly or wrongly as independent contractors, and the Department of Labor (DOL) estimates that up to 30 percent of companies nationwide misclassify their employees.
"As the nation faces one of the worst economic downturns in generations, it is essential that we exercise responsible fiscal stewardship," Woolsey said. "Instead of shredding the safety net for our nations working families, we need to end negligent policies that reward those who abuse the system."
The Employee Misclassification Prevention Act(EMPA)would block this practice by:
* Ensuring that employers keep records reflecting the accurate status of each worker as an employee or non-employee and clarify that employers violate the Fair Labor Standards Act when they misclassify workers;
* Increasing penalties on employers who misclassify their employees and are found to have violated employees' overtime or minimum wage rights;
* Requiring employers to notify workers of their classification as an employee or non- employee;
* Creating an "employee rights web site" to inform workers about their federal and state wage and hour rights;
* Providing protections to workers who are discriminated against because they have sought to be accurately classified;
* Mandating that states conduct audits to identify employers who misclassify workers and require that DOL monitor states' efforts to identify misclassification;
* Directing states to strengthen their own penalties for worker misclassification; and
* Permitting DOL and IRS to refer incidents of misclassification to one another.
For the full text of the Employee Misclassification Prevention Act, please visit: http://hdl.loc.gov/loc.uscongress/legislation.112hr3178.
For a copy of the letter that was sent to the Joint Committee on Deficit Reduction, please visit: http://www.democraticleader.gov/pdf/EducationWorkforce101311.pdf.