Senator Kennedy Introduces Legislation Aimed at Preventing Improper Independent Contractor Classification

Senator Edward M. Kennedy (D. Mass), introduced into the Senate on September 2, 2008, a bill entitled the Employee Misclassification Prevention Act (S. 3648). The bill is intended to prevent employers from improperly classifying employees as independent contractors to avoid paying employee benefits. The bill was co-sponsored by Sen. Barack Obama (D. Ill.), and Sen. John Kerry (D. Mass.).

This bill would amend the Fair Labor Standards Act (FLSA) to make misclassification of workers a prohibited act and would provide for increased penalties for such misclassification. Specifically the bill would make the following changes:

• Provide for liquidated damages for affected workers and for civil penalties not to exceed $10,000.

• Require employers to keep records on and notify workers of their status as independent contractors and their right to challenge that classification.

• Require state unemployment insurance agencies to conduct audits to identify employers who are misclassifying workers, and monitor states’ effectiveness at identifying these employers.

• Allow the Department of Labor (DOL) and the Internal Revenue Service to share information on cases where employers misclassify workers.

• Require the DOL to perform targeted audits focusing on employers in industries that frequently misclassify employees.

• Direct the Secretary of Labor to establish a webpage on the DOL’s website that summarizes the rights of employees under FLSA and other federal laws.

The proper classification of workers can become a complex task depending on the type of industry in which an employer operates. If the Employee Misclassification Prevention Act becomes law, employers who utilize the services of independent contractors may need to take a closer look at whether those workers are properly classified. Employers who are concerned about the classification of their workers can contact our offices for further guidance on this matter.

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