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Labor Agency Cracks Down on Employee Misclassification

The independent-contractor definition saves companies money because they typically don’t provide benefits or overtime compensation to individuals who are not full employees.

February 16, 2010
Related Topics: Corporate Culture, Financial Impact, Latest News
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New federal legislation aimed at getting tough on independent contractor misclassification was introduced September 15 in Congress.

The Fair Playing Field Act of 2010 was introduced by Sen. John Kerry, D-Massachusetts, and Rep. Jim McDermott, D-Washington.

It aims to:

• End the moratorium on Internal Revenue Service guidance addressing worker classification.

• Requires the secretary of the Treasury to issue prospective guidance clarifying the employment status of workers for federal employment tax purposes.

• Requires those who use independent contractors to provide them with a written statement on their federal tax obligations, the labor and employment law protections that do not apply to them and their right to seek a determination from the IRS on their status.

• Raises penalties for misclassification.

“The legislation is timely, as misclassification is an increasing problem, one that puts employers who properly classify their workers at a disadvantage in the marketplace and costs the government billions of dollars in unpaid taxes,” Vice President Joe Biden said in a written statement.

A similar piece of legislation, the Employee Misclassification Prevention Act, was introduced in June.  

Filed by Staffing Industry Analysts, a sister company of Workforce Management. To comment, e-mail editors@workforce.com.

 

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