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Even as the Department of Labor (DOL) and Internal Revenue Service (IRS) begin scouring workplace records for the improper classification of employees as independent contractors, Congress is weighing in with patches to the Fair Labor Standards Act (FLSA) to put some bite behind the bark.
Senator Sherrod Brown, D.-Ohio, has introduced the Employee Misclassification Protection Act (EMPA), which amends the FLSA to require employees to notify newly hired independent contractors in writing of their status.
The law would require employers to retain a record of each notification and specifies that the absence of this record immediately makes the contractor a regular employee of the company. The bill also comes packed with a set of fines and other consequences.
The legislation follows last year's introduction by Senator John Kerry, D.-Massachusetts, of the Taxpayer Responsibility, Accountability and Consistency Act (TRAC?), which would remove the safe harbor provision of the Revenue Act of 1978 regarding employee misclassification.
DOL Secretary Hilda Solis immediately hailed the EMPA for addressing "this significant and troubling issue" of worker misclassification.
Thus far the DOL under Secretary Solis has targeted interns, independent contractors and non-exempt employees who are misclassified and not paid overtime as the focus of their wage and hour enforcement.
Employers, don't fly by the seat of your pants in this important area of worker classification. If you get it wrong, you could be subject to back overtime wages and other penalties. Get yourself a copy of Personnel Concepts' FLSA Overtime Rules Compliance Kit and ensure your employees are classified and paid correctly.
To ensure compliance with the latest regulations and avoid penalties, employers should focus on preventing worker misclassification. Proper classification of employees versus independent contractors is crucial to avoid costly fines and back wages, and training programs can help businesses stay informed about the legal distinctions and requirements.
