I’ve discussed misclassification of employees before. The issue comes up when an employer decides to treat a worker as an independent contractor when the person actually qualifies as an employee. The savings to the employer include worker’s compensation premiums, unemployment insurance premiums, the employer share of the social security and medicare taxes, and, often, the cost of fringe benefits. In addition, an employee has protections under various non-discrimination laws which usually do not apply to independent contractors.
Congress now has before it a new version of The Employee Misclassification Prevention Act. It was introduced last week, and is expected to get a favorable hearing.
The law would add enforcement teeth to the Fair Labor Standards Act. One provision adds a presumption that someone receiving money for the performance of work is an employee, unless the employer has maintained records related to the classification and the hours worked and wages paid. In addition, the misclassified employee will be entitled to doubled liquidated damages for that violation. In other words, the amount recoverable by the misclassified employee could be triple the unpaid or underpaid wages, as is the case in state law.
Maryland is targeting specific industries, such as the landscaping industry, believed to have rampant violations. The new federal bill requires the Department of Labor to engage in targeted audites of industries the department finds to have a frequent incidence of misclassification.