2010 has now seen two significant pieces of legislation introduced to respond to the perceived problem of contractor misclassification. In April, the Employee Misclassification Prevention Act was introduced, which seeks to deter misclassification through increased Department of Labor scrutiny and penalties. Then on September 15, 2010, the Fair Playing Field Act of 2010 was introduced. That Act proposes to eliminate a safe-harbor provision under the Internal Revenue Code that has made it easier for companies to avoid tax penalties for misclassification and to replace it with a less forgiving safe harbor that does not apply prospectively. Both bills appear to have some bipartisan support. If these pieces of legislation do not come up for a vote this year, they are likely to be introduced next year in substantially the same form.
Combined with additional scrutiny from federal and state agencies and an increasing number of class-action lawsuits filed by the plaintiffs’ bar, this proposed legislation makes it even more important that employers properly classify their workers under the applicable laws, especially as to groups of similarly situated workers.