Proposed law would increase worker misclassification penalties

Although improperly categorizing staff already can lead to large penalties and costly legal entanglements, a new proposed federal law would increase the price paid by businesses that incorrectly designate non-exempt workers as independent contractors or as exempt from hourly time and attendance compensation requirements.

The Payroll Fraud Prevention Act of 2013 was recently put before the U.S. Senate for consideration, according to attorney Edward N. Boehm Jr. of firm Fisher and Phillips LLP. If passed, the legislation would increase financial obligations for misclassification as well as require more oversight and notification on the part of businesses. Companies would have to provide written notification of a worker's status upon the beginning of employment, give them information about the U.S. Department of Labor and provide contact information for that group's local office.

Attorneys Kevin Ceglowski and David Woodard of firm Poyner Spruill LLP recommend organizations spend time doing thoughtful analysis of employee classification, duties and organizational relationship. The pair pointed out that a variety of organizations, from the DOL to the IRS and state agencies, all have a stake in reducing improper worker labeling. The time put into these efforts can pay off when employees are properly designated and lawsuits and punitive actions related to these issues are avoided.

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