Employee Misclassification

by JFiepke August 10, 2015
10:40 AM

Congress is considering duplicate bills, reintroduced this year, which would crack down on employers that misclassify employees as independent contractors. The Payroll Fraud Prevention Act would amend the Fair Labor Standards Act to require employers accurately classify workers and provide employees with notice of their classification. Democrats Sen. Bob Casey of Pennsylvania and Rep. Frederica Wilson of Florida introduced the legislation in their respective chambers July 29, which was referred to committees. The bill would make it a violation of the Fair Labor Standards Act to misclassify employees or discriminate against them for opposing their classification. It would impose up to $1,100 for a violation of misclassification, minimum wage or overtime standards and up to $5,000 for repeat or willful violations. The measure would also extend a private right of action to misclassified employees to recover wages and allow double liquidated damages for non-compliance with minimum wage or maximum hour standards. Additionally, the bill would: Make unemployment compensation grants contingent on states meeting certain requirements. Directs all divisions of the Department of Labor to report misclassification to the DOL’s Wage and Hour Division, which may provide this information to the IRS and Requires that division conduct audits of industries with frequent incidence of misclassification

The trucking industry historically has used the independent contractor model. The independent contractor has long been a very important part of the trucking industry. It will continue to be a very important part of the trucking industry. Unfortunately many in the trucking industry use the independent contractor incorrectly. The reasons for this is are many, but the main one is it allows the small business to avoid many of the financial challenges of having employees. When used properly the independent contractor model is a very effective business model for both parties. The days of being truly independent; having own authority, paying IRP, IFTA, UCR, Insurance, and negotiating rates is coming to an end for many. I didn't even mention the cost of equipment continuing to rise. Those economic factors are leading even more independent contractor to lease to larger fleets who provide all those service plus have built incredible discount programs for their independent contractors. That model will continue to thrive as the economy grows. The question is will the various lawsuits and proposed laws hurt the business that have legit independent contractors business practices?

The misclassifying an employee is a huge issue in many industries.  Many states have tried to address the issue in some form or fashion over the past several years. In Kentucky, a workers classification bill has been filed every year for the last 5 years. If you are using independent contractors or paying drivers like they are independent contractors you need to make sure you understand the law. It is a costly mistake if you are found to have misclassified your workforce.

Test

by twg December 5, 2014
10:10 AM

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