Feds Poised to Pursue Worker Misclassification as a Crime
For years, employers have been warned that misclassifying employees as independent contractors could lead to expensive consequences.
But soon the practice could also lead to criminal penalties: Congress is expected to enact a bill introduced last week in both the House of Representatives and the Senate that would make it a federal offense to do so, reports a Pepper Hamilton media advisory. (Employers, of course, may continue to treat true independent contractors as independent contractors.)
The Employee Misclassification Prevention Act “is a game-changer,” says partner Richard Reibstein in the release. “Because it is expected to face little opposition in the House and Senate, employers should use this narrow window of time to immediately review their employment classifications. The government is expected to aggressively pursue companies that are in obvious noncompliance.”
If the EMPA is passed, potential penalties for noncompliance would include fines of up to $5,000 per employee.
The law would also require employers to provide new hires with notice concerning their rights.
Details about how employers can minimize the risks associated with independent contractors are provided in a lengthy article posted on the law firm’s website.
ABAJournal.com (Aug. 2007): “Are FedEx Drivers Really Contractors?”
ABAJournal.com (Dec. 2007): “Calif. Sues Janitor Cos., Claims ‘Flagrant’ Independent Contractor Abuses”
Construction Executive: “The Crackdown on Independent Contractor Misclassification”
Hartford Business: “Self-Audit On Independent Contractors Can Avoid Surprises”
Parade: “A Crackdown on Cheating Companies”