Staffing Industry Analysts (SIA), the Global Advisor on Staffing and Workforce Solutions, reports on a Congressional hearing on a independent contractor misclassification bill. SIA reports:
Companies that misclassify workers as independent contractors can save at least 16.7% on labor costs and they can underbid businesses that don’t misclassify to win projects, according to testimony before a US House subcommittee last week. However, one proposal to target misclassification will negatively impact businesses operating on the up and up.
Those were some of the comments last Thursday during a hearing on independent contractor misclassification held by the Workforce Protection Subcommittee of the US House of Representatives’ Education and Labor Committee.
Misclassification “is too often used as a cost-cutting strategy by low-road employers to gain an unfair competitive advantage,” subcommittee chair Rep. Alma Adams, D-North Carolina, said at the start of the hearing.
Titled “Misclassification of employees: Examining the costs to workers, businesses and the economy,” the hearing included potential legislation referred to as the “Payroll Fraud Prevention Act” that could, according to testimony Thursday:
- Require employers to provide workers with written notices of their classification; business that fail to provide proper notice will be presumed to be employers.
- Establish civil penalties for violations of up to $1,100 per violation and up to $5,000 for willful violations.
- Extend a private right of action to misclassified employees to recover lost wages.
- Direct the US Department of Labor’s Wage and Hour Division to conduct audits of industries with frequent incidents of misclassification.
Independent contractors are excluded from several workplace protections, according to testimony from Sally Dworak-Fisher, an attorney at the Public Justice Center. These include minimum wage protections, unemployment insurance and workers’ comp. They are also not shielded by anti-discrimination laws or family and medical leave protections, and they lack right to collectively bargain.
“We regularly see low-wage home healthcare workers being forced to sign contracts saying they are ‘independent contractors’ even as they are assigned a pay rate and a work schedule by the home care business,” Dworak-Fisher reported.