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New Act to Combat Employee Misclassification and Payroll Fraud

May 4, 2011

According to a recent announcement made by Senator Tom Harkin (D-IA), that our attorneys discussed in a related Carson, California Employment Lawyers blog, Harkin, along with Senators Sherrod Brown (D-OH), and Richard Blumenthal (D-CT), introduced a new act into Congress--the Payroll Fraud Prevention Act--similar to the Employee Misclassification Prevention Act introduced last year.

Under the Payroll Fraud Prevention Act, the Fair Labor Standards Act (FLSA) would be expanded, and would require that employers keep accurate classification records (exempt vs. non-exempt) of every worker who performs labor and services for their company and why. Employers would also be required to explain to workers their classification status, as either employee or independent contractor, and to direct them to the U.S. Department of Labor if they suspect employee misclassification.

If an employer violates the notice requirement for employee misclassification, under the new act they would be responsible for pay penalties of up to $5,000 per worker. Triple damages would also be imposed if an employer willfully violates the minimum wage or overtime laws of the FLSA by engaging in employee misclassification. Under the act the Secretary of Labor would be responsible for creating a database informing workers about their state and federal wage and hour rights and the DOL would also conduct audits to target industries with high rates of employee misclassification.

Under the bill, employees who are frequently misclassified as exempt from overtime laws, would be given their legal right to FLSA employee benefits, like minimum wage, overtime, and unemployment compensation, and others benefits. The bill would also aim to stop employers who misclassify employees to avoid paying their fair share of taxes--as they would be committing payroll fraud.

In Tustin, Villa Park, Westminster and Yorba Linda, California, contact our employment lawyers at Howard Law, PC today

New 'Payroll Fraud' bill targets worker misclassification, HR Morning, April 25, 2011

U.S. Sen. Harkin: Introduces legislation to prevent payroll fraud, protect workers' rights, and level playing field for employers, Iowa Politics.com Press Release, April 11, 2011

Sens. Harkin, Brown, Blumenthal Introduce Legislation to Prevent Payroll Fraud, Protect Workers' Rights, and Level Playing Field For Employers, Tom Harkin Iowa's Senator Press Release, April 11, 2011

U.S. Senate: HELP Committee Hearings

Related Web Resources:

California Department of Industrial Relations (DIR): The Division of Labor Standards Enforcement

U.S. Department of Labor: Wage and Hour Division (WHD), Fair Labor Standards Act (FLSA)

U.S. Sen. Harkin: Statement at the HELP Committee Hearing "Leveling the Playing Field: Protecting Workers and Businesses Affected by Misclassification", Iowa Politics.com, June 17, 2010

Related Blog Posts:

Senator Harkin Introduces Payroll Fraud Prevention Act in Congress, California Employment Lawyers Blog, April 28, 2011

Senator Harkin Aims to "Level the Playing Field" to Protect Workers And Businesses from Employee Misclassification, California Employment Lawyers Blog, June 23, 2010

New State Legislation Holds Employers Accountable for Employee Misclassification, California Employment Lawyers Blog, October 25, 2010