New Bill to Attack Worker Misclassification

Posted by marykeating on September 16, 2010 under Wage and hour issues | Be the First to Comment

Yesterday a bill was introduced in both houses of Congress to crack down on worker misclassification.

The law is called the “Fair Playing Field Act of 2010,” and is endorsed by the President.  The press release from Senator Kerry’s office is playing the bill up as closing a tax loophole.  Indeed, businesses paying their workers appropriately have a competitive disadvantage when other companies are refusing to pay FICA tax, unemployment tax, workers compensation premiums, and fringe benefits.  The other side of the coin is that employees have those very protections if they are injured or become unemployed.  Self-employed individuals (people classified as independent contractors) are also liable to pay the employer’s half of the FICA tax, called self-employment tax.

The tax loophole sought to be closed gave employers a break on penalties if they were caught misclassifying employees.  It also will require more regulations to clarify the line between employee and independent contractor, which is not always clear.  Maryland similarly has an initiative aimed specifically at several industries, such as lawn care and construction, that have been found to have a high proportion of companies skirting the law.