Independent Contractor Compliance Blog - by Collabrus™

As further evidence of the Federal Government’s stepped up interest in closing the “tax gap” caused by employee misclassification, a new federal bill to get tough on companies that misclassify employees as independent contractors was introduced last Thursday, April 22, 2010, by U.S. Sen. Sherrod Brown (D-OH) and U.S. Rep. Lynn Woolsey (D-CA).

The “Employee Misclassification and Prevention Act” would require employers to keep records on the status of each worker and increase penalties on employers who misclassify workers, according to Sherrod’s office. It would also create an “employee rights Web site” to inform workers about their rights and it would create protections for workers discriminated against because they sought accurate classification.

The bill also would require states to conduct audits to identify misclassification, and to strengthen their own penalties for misclassification. In addition, the bill would allow the Department of Labor and IRS to refer incidents of misclassification to one another and direct states.

Also, the Department of Labor would be directed to conduct targeted audits of industries that frequently misclassify workers.

Brown cited a study by the Ohio Attorney General that Ohio loses at least $160 million a year because of worker misclassification.

U.S. Secretary of Labor Hilda Solis lauded the bill, and said her department is already addressing the issue of misclassification. “The Department of Labor is working with the Vice President’s Middle Class Task Force and the Department of Treasury on a multi-agency initiative to develop strategies to address this issue,” Solis said in a press release. “The administration’s budget request for fiscal year 2011 includes $25 million for the Department of Labor as part of this initiative, including $12 million for increased enforcement of wage and overtime laws in cases where employees have been misclassified. The Wage and Hour Division is currently considering how to best target its FY 2011 enforcement efforts and is emphasizing misclassification in its ongoing FY 2010 enforcement strategy.”

We’re entering a new era, one where employers simply cannot run the risk independent contractors who are misclassified as employees. It is a complex issue, one that is becoming more challenging and dangerous with each new piece of legislation. The safest and most cost-effective way to address this problem is to engage a proven industry expert, like Collabrus, that brings expertise and tested compliance solutions to your company.