by Scott Braddock | September 26, 2019
Later this year, Democrats in the US House of Representatives plan to restart their push to penalize companies that compensate their workers as independent contractors when, by law, they should be classified as employees and compensated as such.
Of course, there are many legitimate uses of contract labor. But the issue arises when employers abuse the classification to skirt payroll taxes and benefits like health care and retirement plans.
Unscrupulous employers often use the practice to be able to submit much lower bids for projects, undercutting responsible contractors. Several states have already passed laws to penalize those who cheat workers and taxing agencies in this way. California is pressing ahead with major reforms and Texas, several years ago, passed a targeted crackdown on misclassification on taxpayer-funded construction.
Bloomberg has more on the new push by House Democrats in Washington:
The bill comes as Uber, Lyft, and other gig economy companies have been embroiled in legal disputes over their classification of workers as independent contractors. That designation means the workers aren’t protected by minimum wage and overtime pay requirements, don’t have the right to unionize, and aren’t eligible for workers’ compensation and unemployment insurance benefits.
Gig companies recently led an unsuccessful lobbying blitz against a new California law that makes it harder to classify workers as contractors.
Classification questions have also plagued construction and a wide range of other industries.
Previous versions of the bill would have amended the Fair Labor Standards Act to require employers to accurately classify workers and double the liquidated damages for unpaid wages owed to those wrongly treated as contractors. The bill also would have banned businesses from retaliating against workers for challenging their classification.
Here is a copy of the bill as proposed.