[Congressional Record Volume 154, Number 86 (Friday, May 23, 2008)]
[Extensions of Remarks]
[Page E1049]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page E1049]]
 INTRODUCTION OF THE EMPLOYEE MISCLASSIFICATION PREVENTION ACT OF 2008

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                          HON. LYNN C. WOOLSEY

                             of california

                    in the house of representatives

                        Wednesday, May 21, 2008

  Ms. WOOLSEY. Madam Speaker, Employers who misclassify their employees 
as independent contractors rob workers of needed pay and benefits and 
cost government at all levels substantial uncollected revenues--
resources that are needed for vital government programs and services.
  Yet misclassification is widespread. According to the General 
Accounting Office, at least 10 million workers in the U.S. are 
classified as independent contractors, and studies show that as many as 
30 percent of employers misclassify their workers. Why do they do it? 
They misclassify to avoid the cost of payroll taxes, insurance premiums 
and mandated benefits, and to boost their profits. In fact, the 
Department of Labor has concluded that the number one reason for 
misclassification is to avoid the payment of workers compensation 
premiums, as well as workplace injury and disability-related disputes.
  The cost is high for employees, who when misclassified, lose out on 
employee benefits, including those that are exempt from taxation or 
receive tax-deferred benefits, such as retirement, life insurance, 
accident and health coverage, qualified tuition reduction programs, 
benefits under a cafeteria plan, educational assistance programs and 
dependent care assistance programs. Additionally misclassified workers 
are not afforded even minimal workforce protections, including workers 
compensation, minimum wage, overtime pay, health and safety 
requirements and the right to join a union. And eligibility for 
Medicare, Social Security and Unemployment compensation is negatively 
affected as well.
  The cost to society is high as well, and it is estimated that 
billions of dollars are lost each year; money that would otherwise be 
paid to the States and the Federal Government in taxes. Despite, this 
enormous problem, the Department of Labor (DOL) has failed not only to 
crack down on this practice by enforcing current laws, but has failed 
to coordinate with other agencies to address the issue. In addition, it 
is unclear under the law which standard should be employed for 
determining who is and who is not an independent contractor.
  The Employee Misclassification Prevention Act of 2008, which 
Representatives Andrews, Michaud, Miller and I are introducing today 
attacks the problem of misclassification head-on by:
  Clarifying that employee records must reflect the worker's accurate 
status or classification as an employee or non-employee and that it is 
a violation of the Act to make an inaccurate classification.
  Requiring employers to provide employees and non-employees notice of 
their status and notice of their rights to challenge that 
classification.
  Providing additional penalties for misclassification as well as 
increased penalties for violations that are willful or repeated.
  Requiring state unemployment insurance agencies to conduct audits to 
identify employers who are misclassifying employees.
  Mandating the Department of Labor (DOE) to develop a system to track 
and monitor States' effectiveness in identifying employers who 
misclassify.
  Explicitly allowing DOL and the Internal Revenue Service (IRS) to 
refer incidents of misclassification to one another; and
  Requiring DOL to perform targeted audits focusing on employers in 
industries that frequently misclassify employees.
  We know that there are good employers out there who pay their 
employees fair and honest wages. This bill is to protect bona fide 
employees from the 30 percent who don't.

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