[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 3254 Introduced in Senate (IS)]

111th CONGRESS
  2d Session
                                S. 3254

  To amend the Fair Labor Standards Act of 1938 to require persons to 
    keep records of non-employees who perform labor or services for 
     remuneration and to provide a special penalty for persons who 
    misclassify employees as non-employees, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 22, 2010

 Mr. Brown of Ohio (for himself, Mr. Harkin, Mr. Durbin, Mrs. Murray, 
 Mr. Casey, and Mr. Merkley) introduced the following bill; which was 
 read twice and referred to the Committee on Health, Education, Labor, 
                              and Pensions

_______________________________________________________________________

                                 A BILL


 
  To amend the Fair Labor Standards Act of 1938 to require persons to 
    keep records of non-employees who perform labor or services for 
     remuneration and to provide a special penalty for persons who 
    misclassify employees as non-employees, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Employee Misclassification 
Prevention Act''.

SEC. 2. CLASSIFICATION OF EMPLOYEES AND NON-EMPLOYEES.

    (a) Recordkeeping and Notice Requirements.--Section 11(c) of the 
Fair Labor Standards Act of 1938 (29 U.S.C. 211(c)) is amended--
            (1) by striking ``(c) Every employer subject to any 
        provision of this Act or of any order issued under this Act'' 
        and inserting the following:
    ``(c) Recordkeeping and Notice Requirements.--
            ``(1) In general.--Every person subject to any provision of 
        this Act or of any order issued under this Act'';
            (2) by striking ``of the persons employed by him'' and 
        inserting the following: ``of--
                    ``(A) each individual employed by such person'';
            (3) by striking ``employment maintained by him, and shall'' 
        and inserting the following: ``employment;
                    ``(B) subject to paragraph (2), each individual--
                            ``(i) who is not an employee within the 
                        meaning given the term in section 3(e) 
                        (referred to in this subsection as a `non-
                        employee');
                            ``(ii) whom the person has engaged, in the 
                        course of the person's trade or business, for 
                        the performance of labor or services; and
                            ``(iii)(I) with respect to whom the person 
                        is required to file an information return under 
                        section 6041A(a) of the Internal Revenue Code 
                        of 1986; or
                            ``(II) who is providing labor or services 
                        to the person through an entity that is a 
                        trust, estate, partnership, association, 
                        company, or corporation (as such terms are used 
                        in section 7701(a)(1) of the Internal Revenue 
                        Code of 1986) if--
                                    ``(aa) such individual has an 
                                ownership interest in the entity;
                                    ``(bb) creation or maintenance of 
                                such entity is a condition for the 
                                provision of such labor or services to 
                                the person; and
                                    ``(cc) the person would be required 
                                to file an information return for the 
                                entity under section 6041A(a) of the 
                                Internal Revenue Code of 1986 if the 
                                entity were an individual; and
                    ``(C) the remuneration and hours relating to the 
                performance of labor or services by each individual 
                described in subparagraph (B); and
                    ``(D) the notices required under paragraph (5),
        and shall''; and
            (4) by adding at the end the following:
            ``(2) Recordkeeping limitation.--A person otherwise subject 
        to the requirements of paragraph (1) shall have no 
        responsibility for making, keeping, or preserving records, 
        including the records described in such paragraph and paragraph 
        (4), concerning the employees of any individual described in 
        paragraph (1)(B) or the non-employees with whom such individual 
        has engaged for the performance of labor or services for such 
        person, unless such records are provided during the course of 
        the trade or business to the person.
            ``(3) Presumption.--
                    ``(A) In general.--For purposes of this Act and the 
                regulations or orders issued under this Act, an 
                individual who is employed, or who is remunerated for 
                the performance of labor or services, by a person, 
                shall be presumed to be an employee of the person if--
                            ``(i) the person has not made, kept, and 
                        preserved records in accordance with 
                        subparagraphs (B) and (C) of paragraph (1) 
                        regarding the individual; or
                            ``(ii) the person has not provided the 
                        individual with the notice required under 
                        paragraph (5).
                    ``(B) Rebuttal.--The presumption under subparagraph 
                (A) shall be rebutted only through the presentation of 
                clear and convincing evidence that an individual 
                described in such subparagraph is not an employee 
                (within the meaning of section 3(e)) of the person.
            ``(4) Accurate classification.--An accurate classification 
        of the status of each individual described in paragraph (1) as 
        either an employee (within the meaning of section 3(e)) of the 
        person maintaining the records or a non-employee of such person 
        shall be included within the records under this subsection.
            ``(5) Notice.--
                    ``(A) In general.--Every person subject to any 
                provision of this Act or of any order issued under this 
                Act shall provide the notice described in subparagraph 
                (C) to each employee of the person and each individual 
                classified by the person as a non-employee under 
                paragraph (1)(B).
                    ``(B) Timing of notice.--
                            ``(i) In general.--Such notice shall be 
                        provided, at a minimum, not later than 6 months 
                        after the date of enactment of the Employee 
                        Misclassification Prevention Act, and 
                        thereafter--
                                    ``(I) for new employees, upon 
                                employment; and
                                    ``(II) for new non-employees who 
                                are classified under paragraph (1)(B), 
                                upon commencement of the labor or 
                                services described in such paragraph.
                            ``(ii) Change in status.--Each person 
                        required to provide notice under subparagraph 
                        (A) to an individual shall also provide such 
                        notice to such individual upon changing such 
                        individual's status as an employee or non-
                        employee under paragraph (1).
                    ``(C) Contents of notice.--The notice required 
                under this paragraph shall be in writing and shall--
                            ``(i) inform the individual of the 
                        individual's classification, by the person 
                        submitting the notice, as an employee or a non-
                        employee under paragraph (1);
                            ``(ii) include a statement directing such 
                        individual to a Department of Labor Web site 
                        established for the purpose of providing 
                        further information about the rights of 
                        employees under the law;
                            ``(iii) include the address and telephone 
                        number for the applicable local office of the 
                        United States Department of Labor;
                            ``(iv) include for each individual 
                        classified as a non-employee under paragraph 
                        (1)(B) by the person submitting the notice, the 
                        following statement: `Your rights to wage, 
                        hour, and other labor protections depend upon 
                        your proper classification as an employee or 
                        non-employee. If you have any questions or 
                        concerns about how you have been classified or 
                        suspect that you may have been misclassified, 
                        contact the U.S. Department of Labor.'; and
                            ``(v) include such additional information 
                        as the Secretary shall prescribe by 
                        regulation.''.
    (b) Special Prohibited Acts.--Section 15(a) of the Fair Labor 
Standards Act of 1938 (29 U.S.C. 215(a)) is amended--
            (1) by striking paragraph (3) and inserting the following:
            ``(3) to discharge or in any other manner discriminate 
        against any individual (including an employee) because such 
        individual has--
                    ``(A) opposed any practice, or filed a petition or 
                complaint or instituted or caused to be instituted any 
                proceeding--
                            ``(i) under or related to this Act 
                        (including concerning an individual's status as 
                        an employee or non-employee for purposes of 
                        this Act); or
                            ``(ii) concerning an individual's status as 
                        an employee or non-employee for employment tax 
                        purposes within the meaning of subtitle C of 
                        the Internal Revenue Code of 1986;
                    ``(B) testified or is about to testify in any 
                proceeding described in subparagraph (A); or
                    ``(C) served, or is about to serve, on an industry 
                committee;'';
            (2) in paragraph (5), by striking the period at the end and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(6) to fail to accurately classify an individual as an 
        employee.''.
    (c) Special Penalty for Certain Misclassification, Recordkeeping, 
and Notice Violations.--Section 16 of the Fair Labor Standards Act of 
1938 (29 U.S.C. 216) is amended--
            (1) in subsection (b)--
                    (A) in the sixth sentence, by striking ``any 
                employee'' each place the term occurs and inserting 
                ``any employee or individual'';
                    (B) in the fourth sentence, by striking 
                ``employee'' and inserting ``employee or individual'';
                    (C) in the third sentence--
                            (i) by striking ``either of the preceding 
                        sentences'' and inserting ``any of the 
                        preceding sentences'';
                            (ii) by striking ``one or more employees'' 
                        and inserting ``one or more employees or 
                        individuals''; and
                            (iii) by striking ``other employees'' and 
                        inserting ``other employees or individuals, 
                        respectively,''; and
                    (D) by inserting after the first sentence the 
                following: ``Such liquidated damages are doubled 
                (subject to section 11 of the Portal-to-Portal Pay Act 
                of 1947 (29 U.S.C. 260)) where, in addition to 
                violating the provisions of section 6 or 7, the 
                employer has violated the provisions of section 
                15(a)(6) with respect to such employee or employees.''; 
                and
            (2) in subsection (e), by striking paragraph (2) and 
        inserting the following:
    ``(2) Any person who violates section 6, 7, 11(c), or 15(a)(6) 
shall be subject to a civil penalty, for each employee or other 
individual who was the subject of such a violation, in an amount--
            ``(A) not to exceed $1,100; or
            ``(B) in the case of a person who has repeatedly or 
        willfully committed such violation, not to exceed $5,000.''.
    (d) Employee Rights Web Site.--
            (1) In general.--Not later than 180 days after the date of 
        enactment of this Act, the Secretary of Labor shall establish, 
        for purposes of section 11(c)(5)(C)(ii) of the Fair Labor 
        Standards Act of 1938 (as added by this Act), a single web page 
        on the Department of Labor Web site that summarizes in plain 
        language the rights of employees as described in the amendments 
        made by subsection (a) and other information considered 
        appropriate by the Secretary, including appropriate links to 
        additional information on the Department of Labor Web site or 
        other Federal agency Web sites. In addition, such web page--
                    (A) shall include a statement explaining that 
                employees may have additional or greater rights under 
                State or local laws and how employees may obtain 
                additional information about their rights under State 
                or local laws;
                    (B) shall be made available in English and any 
                other languages that the Secretary determines to be 
                prevalent among individuals likely to access the web 
                page; and
                    (C) may provide a link to permit individuals to 
                file complaints online.
            (2) Coordination with other federal web sites.--The 
        Secretary shall coordinate with other relevant Federal agencies 
        in order to provide information similar to the information 
        described in paragraph (1) (or a link to the Department of 
        Labor web page required by this subsection) on the Web sites of 
        such other agencies.

SEC. 3. MISCLASSIFICATION OF EMPLOYEES FOR UNEMPLOYMENT COMPENSATION 
              PURPOSES.

    (a) In General.--Section 303(a) of the Social Security Act (42 
U.S.C. 503(a)) is amended--
            (1) in paragraph (10), by striking the period and inserting 
        ``; and''; and
            (2) by adding after paragraph (10) the following:
            ``(11)(A) Such auditing and investigative procedures as may 
        be necessary to identify employers that have not registered 
        under the State law or that are paying unreported wages, where 
        these actions or omissions by the employers have the effect of 
        excluding employees from unemployment compensation coverage; 
        and
            ``(B) The making of quarterly reports to the Secretary of 
        Labor (in such form as the Secretary of Labor may require) 
        describing the results of the procedures under subparagraph 
        (A); and
            ``(12) The establishment of administrative penalties for 
        misclassifying employees, or paying unreported wages to 
        employees without proper recordkeeping, for unemployment 
        compensation purposes.''.
    (b) Review of Auditing Programs.--The Secretary of Labor shall 
include, in the Department of Labor's system for measuring States' 
performance in conducting unemployment compensation tax audits, a 
specific measure of their effectiveness in identifying the 
underreporting of wages and the underpayment of unemployment 
compensation contributions (including their effectiveness in 
identifying instances of such underreporting or underpayments despite 
the absence of cancelled checks, original time sheets, or other similar 
documentation).
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by subsection (a) shall take effect 12 months 
        after the date of the enactment of this Act.
            (2) Exception.--If the Secretary of Labor finds that 
        legislation is necessary in order for the unemployment 
        compensation law of a State to comply with the amendments made 
        by subsection (a), such amendments shall not apply with respect 
        to such law until the later of--
                    (A) the day after the close of the first regular 
                session of the legislature of such State which begins 
                after the date of the enactment of this Act; or
                    (B) 12 months after the date of the enactment of 
                this Act.
    (d) Definition of State.--For purposes of this section, the term 
``State'' has the meaning given such term by section 3306(j) of the 
Internal Revenue Code of 1986.

SEC. 4. DEPARTMENT OF LABOR COORDINATION, REFERRAL, AND REGULATIONS.

    (a) Coordination and Referral.--Notwithstanding any other provision 
of law, any office, administration, or division of the Department of 
Labor that, while in the performance of its official duties, obtains 
information regarding the misclassification by a person subject to the 
provisions of the Fair Labor Standards Act of 1938 (29 U.S.C. 201 et 
seq.) or any order issued under such Act of any individual regarding 
whether such individual is an employee or a non-employee contracted for 
the performance of labor or services for purposes of section 6 or 7 of 
such Act (29 U.S.C. 206, 207) or in records required under section 
11(c) of such Act (29 U.S.C. 211(c)), shall report such information to 
the Wage and Hour Division of the Department. The Wage and Hour 
Division may report such information to the Internal Revenue Service as 
the Division considers appropriate.
    (b) Regulations.--The Secretary of Labor shall promulgate 
regulations to carry out this Act and the amendments made by this Act.

SEC. 5. TARGETED AUDITS.

    The audits of employers subject to the Fair Labor Standards Act of 
1938 (29 U.S.C. 201 et seq.) that are conducted by the Wage and Hour 
Division of the Department of Labor shall include certain industries 
with frequent incidence of misclassifying employees as non-employees, 
as determined by the Secretary of Labor.
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