The government is all in a tizzy over the use, or in their eyes the misuse, of the independent contractor classification. As if the threat of IRS or Department of Labor penalties is not enough a new piece of legislation has been introduced in the U.S. Senate.
The bill that has been introduced is the Payroll Fraud Prevention Act of 2013. This bill requires ALL to provide notices to ALL employees and “non-employees” to inform them as to their employment status. Even if the company does not use independent contractors they still have to provide this notice to their employees.
Here is what is required:
- A notice that tells a worker how they are classified;
- Provide the contact information for the U.S. Department of Labor website;
- Tell the workers they should contact the USDOL if they believe that they have been misclassified or if they have any questions.
Employers will be penalized if:
- They do not provide the notice;
- Do not provide the notice in a timely manner, as in the deadline that will be set.
The employer will be penalized in two manners.
- First, a monetary fine of up to $1,100 per person, or $5000 per person if the violation was willful, will be levied.
- Secondly, the workers in question will be assumed to be an employee and all back taxes due will be required.
This bill, S.1687, was filed on November 12, 2013 by Senator Robert Casey (D-PA). With recent changes in the Senate it might stand a chance, but support in the House may be doubtful. This is one more approach to the current administration’s drive to clamp down on the use of the Independent Contractor classification. Apparently they are concerned with the number of companies threatening to use independent contractors as a way of avoiding the requirements of the Affordable Care Act.
Every employer should be well aware of both the IRS and USDOL requirements for working with independent contractors. Woe be to the company that knowingly violates these requirements today, the government is on the look out.