On April 22, a bill was introduced in Congress to make misclassification of employees as independent contractors a federal labor law violation. The Employee Misclassification Prevention Act, or EMPA, would also impose record-keeping and notice obligations upon companies and subject them to hefty penalties for noncompliance with the proposed new law. Upon the likely enactment of EMPA sometime this year, businesses will be confronted with an anticipated onslaught of private actions by workers claiming they are misclassified “employees” who have been improperly paid on an Internal Revenue Service Form 1099 basis.
Prior to the enactment of EMPA — and, to a lesser extent, prior to the date when businesses will be required under EMPA to provide a mandatory notice to their workers stating whether they have been classified as “employees” or “non-employees” (six months following enactment of the law) — there is a window of opportunity for companies to enhance their compliance with existing and proposed laws governing independent contractors. Three options for companies to minimize their exposure to misclassification liability are bona fide restructuring of their relationships with their independent contracts, reclassifying workers and choosing employee leasing or other staffing options.
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