Proposed Legislation Will Make it Harder for Employees to Classify Workers as Independent Contractors
Citing lost revenue due to misclassification of workers, budget challenges and workers’ rights, Senator John Kerry introduced a bill designed to reduce the misclassification of workers as independent contractors. The Taxpayer Responsibility, Accountability and Consistency Act of 2009 is a companion bill to the one introduced in Congress in August 2009.
The bill would require businesses that pay more than $600 annually to corporate service providers to file Forms 1099, and would significantly increase penalties for a company’s failure to do so. It would also revise Section 530 of the Internal Revenue Code by limiting its safe harbor provisions for businesses that classify workers as independent contractors.
Under the proposed legislation, a business would have a reasonable basis for treating an employee as an independent contractor only if 1) no other classified employee held a similar position after 1978; or 2) the IRS did not conclude, in writing or by personal interview with the worker in question, that the worker is an independent contractor.
It is now more important than ever to classify your employees correctly. It is tied to wage and hour laws, specifically payment of overtime, which is a fast-growing area of contention and litigation. Non-compliance with the rules can lead to government fines, penalties and enhanced government presence in your workplace.
The text of the bill can be found at http://www.govtrack.us/congress/billtext.xpd?bill=s111-2882