Payroll Fraud Prevention Act Introduced in Congress to Prevent Employer Misclassification of Employees

A new bill has been introduced in Congress in an effort to prevent employers form misclassifying employees and paying them improperly.

The bill is called the Payroll Fraud Prevention Act, and it would expand the Fair Labor Standards Act (FLSA). It’s similar to the Employee Misclassification Prevention Act that hit Congress a year ago.

Here’s a rundown of what the new bill would do:

  • Require employers to keep records that accurately state whether each worker performing labor or services is an employee or non-employee (like an independent contractor) — and why.
  • Require employers to notify workers of their classification as an employee or non-employee — while directing them to a Department of Labor (DOL) website containing info about the rights of employees, and telling them to contact the DOL if they suspect they have been misclassified.
  • Create penalties of up to $5,000 per worker for a violation of the notice requirements or for misclassifying an employee as a non-employee.
  • Impose triple damages for willful violations of the minimum wage or overtime laws when an employer has misclassified a worker.
  • Direct the secretary of labor to establish a website designed to inform workers about their federal and state wage and hour rights.
  • Direct the DOL to conduct audits targeting industries with high rates of misclassification.

According to the bill’s sponsors, misclassification in an attempt to avoid tax obligations is a form of “payroll fraud.”

Supporters say the purpose of the bill is to eliminate the “tax gap” that’s created when employers misclassify workers — allowing those employers to skip out on paying certain federal, state and local taxes.

Sounds like this bill would be a great protection for employees on the U.S. if it can be passed.  Lets hope.

If you believe your employer is not paying you properly, feel free to contact Scott M. Behren and the Behren Law Firm for a free consultation.


This entry was posted in FLSA, Overtime, Wages and tagged , , , , , , , , , , , , , , , . Bookmark the permalink.
  • Pingback: Congress Proposes New Bill to Combat Payroll Fraud « The Timesheets Blog

  • Ted

     If this thing passes then a lot of these companies that provide time tracking software for employees, that address all kinds of payroll compliance issues should have a bonanza.

  • Dan

    Companies have to understand that the payroll is the largest expense area for many organizations, and one which should be monitored carefully. Payroll fraud accounts for 17% of all fraudulent disbursements suffered by organisations. Payroll fraud by is an uncomplicated scheme. Uncovering the fraudulent transaction and, subsequently, proving the payroll fraud can be difficult because of the dollar magnitude and volume of transactions involved. An outside payroll service provider does not protect your organization from payroll fraud.

    Check this site out: