DOL Testimony Regarding The Employment Misclassification Prevention Act And Misclassification Enforcement Efforts
Significantly, EMPA would:
· codify misclassifications as a violation of the Fair Labor Standards Act
· establish civil monetary penalties for employer recordkeeping violations
· create a legal presumption that, if an employer fails to keep accurate records, the individual is an employee rather than independent contractor
If EMPA passes, it will be even more important for employers to be diligent about properly classifying their workers and maintaining adequate paperwork to support their determinations.
Even while EMPA is winding its way through Congress, however, employers need to be aware of potential issues regarding misclassification. As we have discussed before, the DOL and IRS are working together and with the states to increase enforcement of independent contractor classifications, particularly in the following industries: construction, janitorial work, hotel/motel services, food services and home health care. Indeed, in his testimony, Harris discussed how the DOL recently hosted a State Forum on Misclassification, which was attended by representatives from New York, Connecticut and other states. There also is a joint initiative between the DOL, IRS and 39 states to share information to target employer audits for unemployment insurance and misclassification purposes.
In addition, Harris reported that the DOL is considering implementing a regulation that would require an employer, before classifying a worker as an independent contractor, to perform a written analysis that would be disclosed to the worker. The employer then would have to retain records of its written analysis and make them available in the event of an audit. Apparently, the DOL believes that it has the power to issue this regulation without waiting for EMPA to pass.
In sum, with all that is going on in Congress and at the DOL, it is clear that employers need to be attentive to the misclassification issue and err on the side of caution.