I 

114TH CONGRESS 

1ST SESSION H. R. 3427 

To amend the Fair Labor Standards Act of 1938 to ensure that employees 

are not misclassified as non-employees, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 29, 2015 

Ms. WILSON of Florida (for herself, Mr. SCOTT of Virginia, Mr. CONYERS, 

and Mr. PAYNE) introduced the following bill; which was referred to the 

Committee on Education and the Workforce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined 

by the Speaker, in each case for consideration of such provisions as fall 

within the jurisdiction of the committee concerned 

A BILL 

To amend the Fair Labor Standards Act of 1938 to ensure 

that employees are not misclassified as non-employees, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Payroll Fraud Preven5 tion Act of 2015’’. 


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1 SEC. 2. CLASSIFICATION OF EMPLOYEES AND NON-EM2 PLOYEES. 

3 (a) DEFINITIONS.—Section 3 of the Fair Labor 

4 Standards Act of 1938 (29 U.S.C. 203) is amended by 

5 adding at the end the following: 

6 ‘‘(z) ‘Non-employee’ means an individual who— 

7 ‘‘(1) has been engaged, in the course of the 

8 trade or business of the person, for the performance 

9 of labor or services; and 

10 ‘‘(2) is not an employee of the person. 

11 ‘‘(aa) ‘Covered individual’ when used with respect to 

12 an employer or other person means— 

13 ‘‘(1) an employee of the employer; or 

14 ‘‘(2) a non-employee of the person (including a 

15 person who is an employer)— 

16 ‘‘(A) whom the person has engaged, in the 

17 course of the trade or business of the person, 

18 for the performance of labor or services; and 

19 ‘‘(B)(i) with respect to whom the person is 

20 required to file an information return under 

21 section 6041A(a) of the Internal Revenue Code 

22 of 1986; or 

23 ‘‘(ii) who is providing labor or services to 

24 the person through an entity that is a trust, es25 tate, partnership, association, company, or cor26 poration (as such terms are used in section 


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1 7701(a)(1) of the Internal Revenue Code of 

2 1986) if— 

3 ‘‘(I) such individual has an ownership 

4 interest in the entity; 

5 ‘‘(II) creation or maintenance of such 

6 entity is a condition for the provision of 

7 such labor or services to the person; and 

8 ‘‘(III) the person would be required to 

9 file an information return for the entity 

10 under section 6041A(a) of the Internal 

11 Revenue Code of 1986 if the entity were 

12 an individual.’’. 

13 (b) CLASSIFICATION AS EMPLOYEES.—Section 11(c) 

14 of the Fair Labor Standards Act of 1938 (29 U.S.C. 

15 211(c)) is amended— 

16 (1) by striking ‘‘(c) Every employer subject to 

17 any provision of this Act or of any order issued 

18 under this Act’’ and inserting the following: 

19 ‘‘(c) RECORDKEEPING; CLASSIFICATION; NOTICE.— 

20 ‘‘(1) RECORDKEEPING.—Every person subject 

21 to any provision of this Act or of any order issued 

22 under this Act’’; and 

23 (2) by adding at the end the following: 

24 ‘‘(2) CLASSIFICATION.—Every person (includ25 ing every employer and enterprise), who employs any 


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1 employee engaged in commerce or in the production 

2 of goods for commerce or engages any non-employee 

3 engaged in commerce or in the production of goods 

4 for commerce, shall accurately classify each covered 

5 individual as an employee or a non-employee (as the 

6 case may be). 

7 ‘‘(3) NOTICE.— 

8 ‘‘(A) IN GENERAL.—Every person subject 

9 to any provision of this Act or of any order 

10 issued under this Act shall provide the notice 

11 described in subparagraph (C) to each employee 

12 of the person and each individual classified by 

13 the person as a non-employee under paragraph 

14 (2) and maintain a copy of such notice as a re15 quired record under paragraph (1). 

16 ‘‘(B) TIMING OF NOTICE.— 

17 ‘‘(i) IN GENERAL.—The notice de18 scribed in subparagraph (A) shall be pro19 vided, at a minimum, to each covered indi20 vidual not later than 6 months after the 

21 date of enactment of the Payroll Fraud 

22 Prevention Act of 2015, and thereafter— 

23 ‘‘(I) for each new employee, upon 

24 employment; and 


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1 ‘‘(II) for each new non-employee, 

2 upon commencement of the labor or 

3 services provided by the non-employee. 

4 ‘‘(ii) CHANGE IN STATUS.—Each per5 son required to provide a notice under sub6 paragraph (A) to a covered individual shall 

7 also provide such notice to such individual 

8 upon changing the status of such indi9 vidual as an employee or a non-employee. 

10 ‘‘(C) CONTENTS OF NOTICE.—The notice 

11 required under this paragraph shall be in writ12 ing and shall— 

13 ‘‘(i) inform the covered individual of 

14 the classification of such individual, by the 

15 person submitting the notice, as an em16 ployee or a non-employee; 

17 ‘‘(ii) include a statement directing 

18 such individual to the Department of 

19 Labor website established under section 3 

20 of the Payroll Fraud Prevention Act of 

21 2015, for the purpose of providing further 

22 information about the legal rights of an 

23 employee; 


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1 ‘‘(iii) include the address and tele2 phone number for the applicable local of3 fice of the Department of Labor; and 

4 ‘‘(iv) include for each covered indi5 vidual classified as a non-employee by the 

6 person providing the notice, the following 

7 statement: ‘Your rights to wage, hour, and 

8 other labor protections depend upon your 

9 proper classification as an employee or a 

10 non-employee. If you have any questions or 

11 concerns about how you have been classi12 fied or suspect that you may have been 

13 misclassified, contact the U.S. Department 

14 of Labor.’. 

15 ‘‘(D) PRESUMPTION.— 

16 ‘‘(i) IN GENERAL.—For purposes of 

17 this Act and the regulations or orders 

18 issued under this Act, a covered individual 

19 to whom a person is required to provide a 

20 notice under subparagraph (A) shall be 

21 presumed to be an employee of the person 

22 if the person has not provided the indi23 vidual with such notice within the time re24 quired under subparagraph (B). 


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1 ‘‘(ii) REBUTTAL.—The presumption 

2 under clause (i) shall be rebutted only 

3 through the presentation of clear and con4 vincing evidence that a covered individual 

5 described in such subparagraph is not an 

6 employee of the person.’’. 

7 (c) SPECIAL PROHIBITED ACTS.—Section 15(a) of 

8 the Fair Labor Standards Act of 1938 (29 U.S.C. 215(a)) 

9 is amended— 

10 (1) by striking paragraph (3) and inserting the 

11 following: 

12 ‘‘(3) to discharge or in any other manner dis13 criminate against any covered individual (including 

14 an employee) because such individual has— 

15 ‘‘(A) opposed any practice, filed any peti16 tion or complaint, or instituted or caused to be 

17 instituted any proceeding— 

18 ‘‘(i) under or related to this Act (in19 cluding concerning the status of a covered 

20 individual as an employee or a non-em21 ployee for purposes of this Act); or 

22 ‘‘(ii) concerning the status of a cov23 ered individual as an employee or a non24 employee for employment tax purposes 


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1 within the meaning of subtitle C of the In2 ternal Revenue Code of 1986; 

3 ‘‘(B) testified or is about to testify in any 

4 proceeding described in subparagraph (A); or 

5 ‘‘(C) served, or is about to serve, on an in6 dustry committee;’’; 

7 (2) in paragraph (5), by striking the period at 

8 the end and inserting ‘‘; and’’; and 

9 (3) by adding at the end the following: 

10 ‘‘(6) to wrongly classify an employee of the per11 son as a non-employee in accordance with section 

12 11(c)(2).’’. 

13 (d) SPECIAL PENALTY FOR CERTAIN

14 MISCLASSIFICATION, RECORDKEEPING, AND NOTICE VIO15 LATIONS.—Section 16 of the Fair Labor Standards Act 

16 of 1938 (29 U.S.C. 216) is amended— 

17 (1) in subsection (b)— 

18 (A) in the sixth sentence, by striking ‘‘any 

19 employee’’ each place the term occurs and in20 serting ‘‘any covered individual’’; 

21 (B) in the fourth sentence— 

22 (i) by striking ‘‘employees’’ and in23 serting ‘‘covered individual’’; and 


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1 (ii) by striking ‘‘he gives his consent’’ 

2 and inserting ‘‘such covered individual con3 sents’’; 

4 (C) in the third sentence— 

5 (i) by striking ‘‘either of the preceding 

6 sentences’’ and inserting ‘‘any of the pre7 ceding sentences’’; 

8 (ii) by striking ‘‘one or more employ9 ees’’ and inserting ‘‘one or more covered 

10 individuals’’; and 

11 (iii) by striking ‘‘in behalf of himself 

12 or themselves and other employees’’ and 

13 inserting ‘‘on behalf of such covered indi14 vidual or individuals and other covered in15 dividuals’’; and 

16 (D) by inserting after the first sentence 

17 the following: ‘‘Such liquidated damages are 

18 doubled (subject to section 11 of the Portal-to19 Portal Act of 1947 (29 U.S.C. 260)) where, in 

20 addition to violating the provisions of section 6 

21 or 7, the employer has violated the provisions of 

22 section 15(a)(6) with respect to such employee 

23 or employees.’’; and 

24 (2) in subsection (e), by striking paragraph (2) 

25 and inserting the following: 


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1 ‘‘(2) Any person who violates section 6, 7, 

2 11(c), or 15(a)(6) shall be subject to a civil penalty, 

3 for each employee or other individual who was the 

4 subject of such a violation, in an amount— 

5 ‘‘(A) not to exceed $1,100; or 

6 ‘‘(B) in the case of a person who has re7 peatedly or willfully committed such violation, 

8 not to exceed $5,000.’’. 

9 SEC. 3. EMPLOYEE RIGHTS WEBSITE. 

10 Not later than 180 days after the date of enactment 

11 of this Act, the Secretary of Labor shall establish a single 

12 webpage on the Department of Labor website that sum13 marizes in plain language the rights of employees and non14 employees under the Fair Labor Standards Act of 1938 

15 (29 U.S.C. 201 et seq.), including the rights described in 

16 the amendments made by section 2. 

17 SEC. 4. MISCLASSIFICATION OF EMPLOYEES FOR UNEM18 PLOYMENT COMPENSATION PURPOSES. 

19 (a) IN GENERAL.—Section 303(a) of the Social Secu20 rity Act (42 U.S.C. 503(a)) is amended— 

21 (1) in paragraph (11)(B), by striking the period 

22 and inserting ‘‘; and’’; 

23 (2) in paragraph (12), by striking the period 

24 and inserting ‘‘; and’’; and 


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1 (3) by adding after paragraph (12) the fol2 lowing: 

3 ‘‘(13)(A) Such auditing and investigative proce4 dures as may be necessary to identify employers that 

5 have not registered under the State law or that are 

6 paying unreported wages, where these actions or 

7 omissions by the employers have the effect of exclud8 ing employees from unemployment compensation 

9 coverage; and 

10 ‘‘(B) The making of quarterly reports to the 

11 Secretary of Labor (in such form as the Secretary 

12 of Labor may require) describing the results of the 

13 procedures under subparagraph (A); and 

14 ‘‘(14) The establishment of administrative pen15 alties for misclassifying employees, or paying unre16 ported wages to employees without proper record17 keeping, for unemployment compensation pur18 poses.’’. 

19 (b) REVIEW OF AUDITING PROGRAMS.—The Sec20 retary of Labor shall include, in the Department of La21 bor’s system for measuring the performance of States in 

22 conducting unemployment compensation tax audits, a spe23 cific measure of the effectiveness of States in identifying 

24 the under reporting of wages and the underpayment of 

25 unemployment compensation contributions (including the 


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1 effectiveness of States in identifying instances of such 

2 under reporting or underpayments despite the absence of 

3 cancelled checks, original time sheets, or other similar doc4 umentation). 

5 (c) EFFECTIVE DATE.— 

6 (1) IN GENERAL.—Except as provided in para7 graph (2), the amendments made by subsection (a) 

8 shall take effect 12 months after the date of enact9 ment of this Act. 

10 (2) EXCEPTION.—If the Secretary of Labor 

11 finds that legislation is necessary for the unemploy12 ment compensation law of a State to comply with 

13 the amendments made by subsection (a), such 

14 amendments shall not apply with respect to such law 

15 until the later of— 

16 (A) the day after the close of the first reg17 ular session of the legislature of such State that 

18 begins after the date of enactment of this Act; 

19 or 

20 (B) 12 months after the date of enactment 

21 of this Act. 

22 (d) DEFINITION OF STATE.—For purposes of this 

23 section, the term ‘‘State’’ has the meaning given the term 

24 in section 3306(j) of the Internal Revenue Code of 1986. 


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1 SEC. 5. DEPARTMENT OF LABOR COORDINATION, REFER2 RAL, AND REGULATIONS. 

3 (a) COORDINATION AND REFERRAL.—Notwith4 standing any other provision of law, any office, adminis5 tration, or division of the Department of Labor that, while 

6 in the performance of its official duties, obtains informa7 tion regarding the misclassification by a person subject to 

8 the provisions of the Fair Labor Standards Act of 1938 

9 (29 U.S.C. 201 et seq.), or any order issued under such 

10 Act of any individual regarding whether such individual 

11 is an employee or a non-employee engaged in the perform12 ance of labor or services for purposes of section 6 or 7 

13 of such Act (29 U.S.C. 206, 207), or in records required 

14 under section 11(c) of such Act (29 U.S.C. 211(c)), shall 

15 report such information to the Wage and Hour Division 

16 of the Department of Labor. The Wage and Hour Division 

17 may report such information to the Internal Revenue 

18 Service as the Wage and Hour Division considers appro19 priate. 

20 (b) REGULATIONS.—The Secretary of Labor shall 

21 promulgate regulations to carry out this Act and the 

22 amendments made by this Act. 

23 SEC. 6. TARGETED AUDITS. 

24 The audits of employers subject to the Fair Labor 

25 Standards Act of 1938 (29 U.S.C. 201 et seq.) that are 

26 conducted by the Wage and Hour Division of the DepartVerDate Sep 11 2014 22:18 Aug 10, 2015 Jkt 049200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H3427.IH H3427

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1 ment of Labor shall include certain industries with fre2 quent incidence of misclassifying employees as non-em3 ployees, as determined by the Secretary of Labor. 

Æ 


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