Payne, NELP, and Labor Workers Push Congress to Pass Payroll Fraud Prevention Act to Put a Stop to the Damaging Effects Employee Misclassification Has on Workers and the Economy

Payne, NELP, and Labor Workers Push Congress to Pass Payroll Fraud Prevention Act to Put a Stop to the Damaging Effects Employee Misclassification Has on Workers and the Economy

Newark, N.J. – Today, Congressman Donald M. Payne, Jr. (NJ-10) hosted a press conference with the National Employment Law Project (NELP) and workers on the damaging effects that misclassifying employees as independent contractors has on workers, their families, and our economy.  Misclassification occurs when an employer classifies its workers as an independent contractor – as opposed to an employee. 

“When employers misclassify workers, they are cheating the system,” said Rep. Payne, Jr.  “Six years after the beginning of the recession, wages are stagnant, people struggle to find work that pays the bills, and the people of New Jersey are being left behind, while corporations make record profits.  Employee misclassification is contributing to this divide.”

Employers all too often shirk responsibility for the workers on whose labor they profit;  by misclassifying employees as independent contractors or using abusive subcontracting schemes, they rob workers out of much-needed pay, drain billions of dollars from public revenues through unpaid taxes, put responsible companies at an unfair disadvantage, and destabilize communities,” said Sarah Leberstein, Attorney, National Employment Law Project.  “We simply cannot afford for our nation's growth to be from bad jobs. We must hold employers accountable to ensure our nation's economic recovery.”

“I am one of the very few company drivers who work at the port.  But I work alongside so many other drivers who are misclassified that it creates unfair competition for my employer.  I am affected.  And now my company is starting to use misclassified independent contractors because that is what the competition is doing.  And that is only driving standards down.  For legitimate employees like me – our jobs are at stake,” said Lynford Lawrence, port truck driver for Toll Global Forwarding and Teamsters Local 469 member.

According to the U.S. Department of Labor, between 10-30 percent of employers misclassify their employees.  Many do so to evade responsibility for workplace laws and employer-side taxes, gaining an unfair advantage over law-abiding competitors and draining an estimated  $3-4 billion annually from federal income and employment tax revenues.  Independent contractor misclassification and abusive subcontracting schemes are now prevalent in many of our nation’s fastest-growing jobs; these jobs are often characterized by low wages, extensive wage theft, and high injury rates. 

“They are avoiding paying payroll taxes on those workers, making it more difficult for law-abiding employers to compete,” continued Rep. Payne, Jr.  “The problem is becoming so rampant that it is estimated that as many as 40 percent of employers in New Jersey misclassify their workers. That’s money that could be invested back into New Jersey through the building of roads and bridges or education or research and development.  It’s not fair to our workers and it’s not fair to our government.”

Rep. Payne, Jr. highlighted his bill, The Payroll Fraud Prevention Act, co-introduced with Congressman Joe Courtney (CT-2), which would strengthen protections against independent contractor misclassification.  The bill would:

Provide Proper Classification and Notice to Employees

·         Require that records kept pursuant to the Fair Labor Standards Act (FLSA) include an accurate classification of the workers as to whether an employee or a non-employee.

·         Require that all workers be accurately classified as employees or non-employees. They must be provided with written notice of their classification and directed to DOL employee rights resources.

Provide Prohibitions & Penalties

·         Make it a violation of the FLSA to discharge or discriminate against a worker because he or she has opposed any proactive concerning his or her classification.

·         Make it a violation of the FLSA to misclassify an employee.

·         Extends a private right of action to misclassified employees to recover lost wages, and, when an employer also violates minimum wage or maximum hour standards, double liquidated damages.

·         Subjects employers to a civil penalty up to $1,000 for misclassification violations or violations of minimum wage or overtime standards and up to $5,000 when such violations are repeated or willful.

NELP’s fact sheet detailing the enormous costs of misclassification on federal and state revenues is available here.  A recent report that explores how to restore accountability for outsourced work is here.