The Employee Misclassification Prevention Act (H.R. 3178) and the Payroll Fraud Prevention Act (S. 770)
Rep. Lynn Woolsey (D-CA-06) reintroduced H.R. 3178 and Sen. Sherrod Brown (D-OH) reintroduced the S. 770, companion bills amending the Fair Labor Standards Act of 1938 (FLSA) to jack up the financial consequences to a company that misclassifies an individual as an independent contractor and impose new recordkeeping and notice requirements on a company that does business with an independent contractor. Democrats on the House Education & Workforce Committee have also proposed these same provisions to the Joint Select Committee on Deficit Reduction.
Background
Independent contractors play an important role in survey and opinion research, whether as field ethnographers, focus group moderators, or general research consultants. More fundamentally, any research participant receiving an incentive could conceivably be considered an independent contractor.
Independent contractors accounted for approximately $626 billion in personal income in 2010, according to a study by Navigant Economics.[1] Sadly, this important sector of our nation’s economy is under attack. The effect of government policies that discourage independent contracting would be fewer jobs and reduced economic activity – precisely the opposite of what our economy needs at this critical time.
H.R. 3178 and S. 770’s provisions
- Enhanced financial penalties for worker misclassification.
- New recordkeeping requirements for clients of independent contractors and notices required to be delivered to independent contractors by their clients.
- Burden of proof: Absent compliance with the recordkeeping or notice requirements with respect to an individual, the individual would be presumed to be employee of the company.
- Require all states' laws to audit/investigate employers suspected of paying unreported wages or not properly registering and impose penalties for misclassifying employees or paying unreported wages to employees without proper recordkeeping.
- New Department of Labor website educating workers about their rights and highlighting the disparity of rights accorded employees versus independent contractors.
- Info sharing within the Department and with the IRS regarding worker misclassification cases.
MRA's position
H.R. 3178 and S. 770 would have a dramatic chilling effect on independent contractors and their clients in the research profession, significantly increasing the regulatory risk and administrative burden of doing business with independent contractors. The bills effectively constitute regulatory intimidation by threatening firms with draconian financial penalties and burdensome administrative duties if they choose to do business with sole proprietors.
MRA is opposed to H.R. 3178 and S. 770, and the inclusion of their provisions in any final product from the Joint Select Committee on Deficit Reduction.
[1] Jeffrey A. Eisenach, The Role of Independent Contractors in the U.S. Economy, at 35 (December 2010), Navigant Economics, http://www.naviganteconomics.com/docs/Role%20of%20Independent%20Contractors%20December%202010%20Final.pdf