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Efforts to Prevent the Misclassification of Independent Contractors Continue

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June 18, 2010

On April 22nd, a bill was introduced in both the United States House and Senate titled the Employee Misclassification Prevention Act ("EMPA" or "Act"). H.R. 5107; S. 3254. The Act would amend the Fair Labor Standards Act ("FLSA") to introduce measures designed to prevent the misclassification of independent contractors. Senator Sherrod Brown (D-OH) was one of the co-sponsors of the Senate bill. He stated that misclassified workers are "denied vital worker safeguards" and because of the recession, "workers are too often taken advantage of and lose out on the benefits they rightfully earned. . . . [m]eanwhile, employers who do right by their employees are placed at a disadvantage when competitors are cutting corners." According to the bills' sponsors, the Employee Misclassification Prevention Act aims to correct these issues.
The EMPA would apply to all FLSA-covered employers and would:
  • Impose record-keeping requirements on employers who pay non-employees for labor and/or services
  • Require employers to notify each worker of his or her classification status
  • Protect employees who complain about misclassification status from discrimination
  • Increase fines for misclassification violations up to $1,100 and $5,000 for repeated or willful violations
  • Direct the Department of Labor to create a Web site about employees' rights with regard to classification
  • Direct both state and federal government agencies to increase audits of misclassification status
  • Allow the Wage & Hour Division of the Department of Labor to share information about employers who have misclassified their workers with the IRS 
Secretary of Labor Hilda Solis responded positively to the bill. She stated "One of my goals as secretary of labor is to secure minimum and overtime wages and to help middle class families remain in the middle class. Working on the issue of misclassification is key to attaining those goals because misclassification of employees as independent contractors deprives employees of critical workplace protections and employment benefits to which they are legally entitled."

Schiff Hardin's team of Labor & Employment attorneys will continue to watch the progress of this legislation and keep you informed about how it may affect your business.
Case Filed Under Illinois' Employee Misclassification Act
In state news, Local 134 of the International Brotherhood of Electrical Workers ("IBEW") has filed suit against Northern Illinois Telecom Inc., alleging violations of the new Illinois Employee Misclassification Act ("IECA" or "Act")1. IECA was passed in 2008 and requires the construction and landscaping industries to classify all of their workers as employees unless the situation falls into one of the specific exceptions. 820 ILCS 185/1 et seq. IECA also provides interested parties with a private right of action to enforce this statute; however, very few suits have been introduced under the Act. If the plaintiffs are successful, they are entitled to "the amount of any wages, salary, employment benefits, or other compensation denied or lost to the person by reason of the violation, plus an equal amount in liquidated damages," compensatory damages up to $500 for each violation, attorney's fees and costs, and if retaliation is involved, the "legal or equitable relief as may be appropriate." 820 ILCS 185/60(a). The outcome of this case will offer an important glimpse into how the new IBEW will be interpreted by the courts.
It is clear that the use of independent contractors will continue to receive scrutiny from the courts, federal and state agencies, and the plaintiffs' bar. If you have any questions, Schiff Hardin's Labor & Employment attorneys are prepared to discuss your legal issues surrounding the classification of workers.
1 Complaint, International Brotherhood of Elec. Workers, Local Union No. 134 v. Northern Illinois Telecom, Inc., No. 10-CH-16060 (Ill. Cir. Ct. Apr. 13, 2010).
Schiff Hardin represents management in labor matters and employment-related litigation, and provides counsel to employers with respect to all legal aspects of employer-employee relations. Our firm's labor law practice encompasses both the private sector and the public sector for large and small employers in a broad range of markets and industries.

For more information, please feel free to contact us.
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