Senate Hearing on Employee Misclassification Emphasizes State Efforts

During a Senate Health, Education, Labor and Pensions Committee hearing on the Employee Misclassification Prevention Act held last Thursday, speakers stressed the importance of state efforts to combat misclassification of independent contractors.

The legislation, introduced by Sen. Sherrod Brown (D-Ohio) along with Sens. Tom Harkin (D-Iowa), Dick Durbin (D-Ill.), Patty Murray (D-Wash.), Bob Casey (D-Pa.), Jeff Merkley (D-Ore.), Barbara Mikulski (D-Md.) and Al Franken (D-Minn.), would set up additional record keeping requirements that employers must keep on independent contractors. It would also increase the penalties on businesses found to have misclassified employees as independent contractors. This could greatly affect a number of trucking companies that hire independent contractors as drivers.

In his statement during the hearing, Seth Harris, deputy secretary of the U.S. Department of Labor, said the department held a forum last month to hear about what states have been doing about misclassification. "The importance of working with the states on employee misclassification cannot be overemphasized."

Colleen Gardner, commissioner of the New York State Department of Labor, also spoke at the hearing, outlining New York's problems related to misclassification and some of the efforts of the New York State Joint Enforcement Task Force on Employee Misclassification.

In addition to emphasizing the need for state involvement, most of the hearing's testimonies stressed that misclassification is costing the government billions in unreported tax revenue and is depriving workers of compensation and benefits.

"Misclassification hurts workers who are deprived of their employment rights under state and federal law," Gardner said. "It also hurts legitimate businesses that have to compete against businesses that illegally cut their costs through the misclassification of workers. Finally, it hurts government which does not receive appropriate employment and income taxes."

Harris made a similar comment.

One testimony, however, laid out some of the issues with the legislation. Gary Uber, co-founder of Family Private Care Inc., said that companies that do business with independent contractors may decide that the risks are not worth it. "If that were to occur, the millions of legitimate independent contractors, who -- like any other business -- need clients to survive, would begin to close their businesses and start looking for employment," he said.

Uber also said the decision to work as an independent contractor is not always made by the firm; individuals often choose to work independently, as it can offer many benefits.

"A principal attraction for caregivers to work as independent contractors is that they can make more money as independent contractors, because they receive a much larger portion of a client payment than a caregiver who works as an employee of an agency," he said. "Also, caregivers have more control over when they work and for whom they work, since registries merely offer them client opportunities, and they alone decide which opportunities to pursue."

During his testimony, Uber also said the legislation would impose unworkable recordkeeping requirements.