A new bill targeting the misclassification of workers is making its way through the U.S. Senate. The Payroll Fraud Prevention Act requires an employer subject to the Federal Labor Standards Act (FLSA) to provide written notice of an individual’s employment classification. The law intends to punish employers that misclassify workers as independent contractors to avoid taxes and safety standards.
The notice must include directions to the US Department of Labor (DOL) website, address and telephone of the local U.S. DOL office, and a statement of the individual’s rights. Without this notice, the individual is presumed to be an employee which could result in misclassification penalties.
A misclassified employee results in double the amount of FLSA penalties and a civil money penalty up to $1,100 per individual. Repeat offenders will receive an additional $5,000 penalty. The civil penalties can apply due to misclassification and the required notice not being given even if no FLSA minimum wage or overtime violation occurred.