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“INTRODUCTION OF THE EMPLOYEE MISCLASSIFICATION PREVENTION ACT OF 2008” mentioning the U.S. Dept of Labor was published in the Extensions of Remarks section on pages E1049 on May 23, 2008.
The publication is reproduced in full below:
INTRODUCTION OF THE EMPLOYEE MISCLASSIFICATION PREVENTION ACT OF 2008
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HON. LYNN C. WOOLSEY
of california
in the house of representatives
Wednesday, May 21, 2008
Ms. WOOLSEY. Madam Speaker, Employers who misclassify their employees as independent contractors rob workers of needed pay and benefits and cost government at all levels substantial uncollected revenues--
resources that are needed for vital government programs and services.
Yet misclassification is widespread. According to the General Accounting Office, at least 10 million workers in the U.S. are classified as independent contractors, and studies show that as many as 30 percent of employers misclassify their workers. Why do they do it? They misclassify to avoid the cost of payroll taxes, insurance premiums and mandated benefits, and to boost their profits. In fact, the Department of Labor has concluded that the number one reason for misclassification is to avoid the payment of workers compensation premiums, as well as workplace injury and disability-related disputes.
The cost is high for employees, who when misclassified, lose out on employee benefits, including those that are exempt from taxation or receive tax-deferred benefits, such as retirement, life insurance, accident and health coverage, qualified tuition reduction programs, benefits under a cafeteria plan, educational assistance programs and dependent care assistance programs. Additionally misclassified workers are not afforded even minimal workforce protections, including workers compensation, minimum wage, overtime pay, health and safety requirements and the right to join a union. And eligibility for Medicare, Social Security and Unemployment compensation is negatively affected as well.
The cost to society is high as well, and it is estimated that billions of dollars are lost each year; money that would otherwise be paid to the States and the Federal Government in taxes. Despite, this enormous problem, the Department of Labor (DOL) has failed not only to crack down on this practice by enforcing current laws, but has failed to coordinate with other agencies to address the issue. In addition, it is unclear under the law which standard should be employed for determining who is and who is not an independent contractor.
The Employee Misclassification Prevention Act of 2008, which Representatives Andrews, Michaud, Miller and I are introducing today attacks the problem of misclassification head-on by:
Clarifying that employee records must reflect the worker's accurate status or classification as an employee or non-employee and that it is a violation of the Act to make an inaccurate classification.
Requiring employers to provide employees and non-employees notice of their status and notice of their rights to challenge that classification.
Providing additional penalties for misclassification as well as increased penalties for violations that are willful or repeated.
Requiring state unemployment insurance agencies to conduct audits to identify employers who are misclassifying employees.
Mandating the Department of Labor (DOE) to develop a system to track and monitor States' effectiveness in identifying employers who misclassify.
Explicitly allowing DOL and the Internal Revenue Service (IRS) to refer incidents of misclassification to one another; and
Requiring DOL to perform targeted audits focusing on employers in industries that frequently misclassify employees.
We know that there are good employers out there who pay their employees fair and honest wages. This bill is to protect bona fide employees from the 30 percent who don't.
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