Senate HELP Subcommittee Hearing “Payroll Fraud: Targeting Bad Actors Hurting Workers and Businesses”

During a November 12, 2013, hearing before the Employment and Workplace Safety Subcommittee of the Senate Committee on Health, Education, Labor and Pensions, titled Payroll Fraud: Targeting Bad Actors Hurting Workers and Businesses, Senator Bob Casey (D-Pa) announced his introduction that day of the Payroll Fraud Prevention Act of 2013, which is expected to be similar to a similarly named bill, S. 770, introduced on April 8, 2011, by Senator Sherrod Brown (D-Ohio).

Senator Casey also mentioned a bill that Senator Brown intends to introduce to address the tax aspects of worker misclassification, which might be similar to the Fair Playing Field Act of 2012, S. 2145, introduced on March 1, 2012, by former Senator John Kerry (D-Mass).

Senator Johnny Isakson (R-Ga) emphasized that any proposed change in this area not undermine legitimate independent contractors; and he expressed opposition to any change that would narrow the application of Section 530 of the Revenue Act of 1978.

Testifying at the hearing were three Democrat witnesses and one Republican witness. The first Democrat witness was Matt Anderson, a residential construction worker, who testified about an injury he suffered that was not covered by workers’ compensation because the injury occurred while he was working for a firm that initially classified him as an employee, but then reclassified him as an independent contractor – without any change in the relationship. His injury occurred subsequent to the reclassification. Also testifying was Danny Odom, with Odom Construction Systems, Inc., who recounted the difficulty of bidding against competitors that misclassify workers as independent contractors. The final Democrat witness was Cathy Ruckelshaus, Legal Co-Director, National Employment Law Project, NY, NY. She testified about what she characterized as the “patchwork” of state regulation addressing worker misclassification and the need for a federal law. She stated that NELP receives most complaints in this area from competitors, rather than from workers.

Interestingly, Ms. Ruckelshaus made multiple references to a survey that the U.S. Department of Labor (“DOL” is conducting.  It could be that the survey to which she referred is the same survey that DOL announced in the Federal Register on January 10, 2013, FR Doc:  2013-00389, which many submitted comments opposing.

The Republican witness was Chris MacKrell, Custom Courier Solutions, a “last-mile” delivery company based in Rochester, NY. Mr. MacKrell testified about how he started working as an independent-contractor courier, which led him to create his own successful courier company; and how the ability to do business with independent-contractor couriers is essential to the viability of his company.  He described the flexibility that the independent-contractor option offers individuals and expressed concern about the lack of any proposed legislation aimed at protecting legitimate independent contractors.

Article written by