II 

114TH CONGRESS 

1ST SESSION S. 1896 

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 SENATE OF THE UNITED STATES 

JULY 29, 2015 

Mr. CASEY (for himself, Mr. FRANKEN, Mrs. MURRAY, Ms. WARREN, Mr. 

BROWN, and Mr. MERKLEY) introduced the following bill; which was read 

twice and referred to the Committee on Health, Education, Labor, and 

Pensions 

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) a person has 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 was an 

12 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.— 


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1 ‘‘(A) IN GENERAL.—Every person (includ2 ing every employer and enterprise), who em3 ploys any employee engaged in commerce or in 

4 the production of goods for commerce or en5 gages any non-employee engaged in commerce 

6 or in the production of goods for commerce, 

7 shall— 

8 ‘‘(i) accurately classify each covered 

9 individual as an employee or a non-em10 ployee (as the case may be); 

11 ‘‘(ii) provide, to each covered indi12 vidual, a written notice that— 

13 ‘‘(I) informs the covered indi14 vidual of the classification of such in15 dividual, by the person submitting the 

16 notice, as an employee or a non-em17 ployee; 

18 ‘‘(II) includes a statement direct19 ing such individual to the Department 

20 of Labor website established under 

21 section 3 of the Payroll Fraud Pre22 vention Act of 2015, or other appro23 priate resources, for the purpose of 

24 providing further information about 

25 the legal rights of an employee; 


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1 ‘‘(III) includes the address and 

2 telephone number for the applicable 

3 local office of the Department of 

4 Labor; and 

5 ‘‘(IV) includes for each covered 

6 individual classified as a non-employee 

7 by the person providing the notice, the 

8 following statement: ‘Your rights to 

9 wage, hour, and other labor protec10 tions depend upon your proper classi11 fication as an employee or a non-em12 ployee. If you have any questions or 

13 concerns about how you have been 

14 classified or suspect that you may 

15 have been misclassified, contact the 

16 U.S. Department of Labor.’; and 

17 ‘‘(iii) maintain a copy of such notice 

18 as a required record under paragraph (1). 

19 ‘‘(B) TIMING OF NOTICE.— 

20 ‘‘(i) IN GENERAL.—The notice de21 scribed in subparagraph (A)(ii) shall be 

22 provided, at a minimum, to each covered 

23 individual not later than 6 months after 

24 the date of enactment of the Payroll Fraud 

25 Prevention Act of 2015, and thereafter— 


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1 ‘‘(I) for each new employee, upon 

2 employment; and 

3 ‘‘(II) for each new non-employee, 

4 upon commencement of the labor or 

5 services provided by the non-employee. 

6 ‘‘(ii) CHANGE IN STATUS.—Each per7 son required to provide a notice under sub8 paragraph (A)(ii) to a covered individual 

9 shall also provide such notice to such indi10 vidual upon changing the status of such in11 dividual as an employee or a non-employee. 

12 ‘‘(C) PRESUMPTION.— 

13 ‘‘(i) IN GENERAL.—For purposes of 

14 this Act and the regulations or orders 

15 issued under this Act, a covered individual 

16 to whom a person is required to provide a 

17 notice under subparagraph (A)(ii) shall be 

18 presumed to be an employee of the person 

19 if the person has not provided the indi20 vidual with such notice within the time re21 quired under subparagraph (B). 

22 ‘‘(ii) REBUTTAL.—The presumption 

23 under clause (i) shall be rebutted only 

24 through the presentation of clear and con25 vincing evidence that a covered individual 


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1 described in such subparagraph is not an 

2 employee of the person.’’. 

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

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

5 is amended— 

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

7 following: 

8 ‘‘(3) to discharge or in any other manner dis9 criminate against any covered individual (including 

10 an employee) because such individual has— 

11 ‘‘(A) opposed any practice, filed any peti12 tion or complaint, or instituted or caused to be 

13 instituted any proceeding— 

14 ‘‘(i) under or related to this Act (in15 cluding concerning the status of a covered 

16 individual as an employee or a non-em17 ployee for purposes of this Act); or 

18 ‘‘(ii) concerning the status of a cov19 ered individual as an employee or a non20 employee for employment tax purposes 

21 within the meaning of subtitle C of the In22 ternal Revenue Code of 1986; 

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

24 proceeding described in subparagraph (A); or 


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1 ‘‘(C) served, or is about to serve, on an in2 dustry committee;’’; 

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

4 the end and inserting ‘‘; and’’; and 

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

6 ‘‘(6) to wrongly classify an employee of the per7 son as a non-employee in accordance with section 

8 11(c)(2).’’. 

9 (d) SPECIAL PENALTY FOR CERTAIN

10 MISCLASSIFICATION, RECORDKEEPING, AND NOTICE VIO11 LATIONS.—Section 16 of the Fair Labor Standards Act 

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

13 (1) in subsection (b)— 

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

15 employee’’ each place the term occurs and in16 serting ‘‘any covered individual’’; 

17 (B) in the fourth sentence— 

18 (i) by striking ‘‘employees’’ and in19 serting ‘‘covered individual’’; and 

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

21 and inserting ‘‘such covered individual con22 sents’’; 

23 (C) in the third sentence— 


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

2 sentences’’ and inserting ‘‘any of the pre3 ceding sentences’’; 

4 (ii) by striking ‘‘one or more employ5 ees’’ and inserting ‘‘one or more covered 

6 individuals’’; and 

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

8 or themselves and other employees’’ and 

9 inserting ‘‘on behalf of such covered indi10 vidual or individuals and other covered in11 dividuals’’; and 

12 (D) by inserting after the first sentence 

13 the following: ‘‘Such liquidated damages are 

14 doubled (subject to section 11 of the Portal-to15 Portal Act of 1947 (29 U.S.C. 260)) where, in 

16 addition to violating the provisions of section 6 

17 or 7, the employer has violated the provisions of 

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

19 or employees.’’; and 

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

21 and inserting the following: 

22 ‘‘(2) Any person who violates section 6, 7, 11(c), or 

23 15(a)(6) shall be subject to a civil penalty, for each em24 ployee or other individual who was the subject of such a 

25 violation, in an amount— 


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1 ‘‘(A) not to exceed $1,100; or 

2 ‘‘(B) in the case of a person who has repeatedly 

3 or willfully committed such violation, not to exceed 

4 $5,000.’’. 

5 SEC. 3. EMPLOYEE RIGHTS WEBSITE. 

6 Not later than 180 days after the date of enactment 

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

8 webpage on the Department of Labor website that sum9 marizes in plain language the rights of employees and non10 employees under the Fair Labor Standards Act of 1938 

11 (29 U.S.C. 201 et seq.), including the rights described in 

12 the amendments made by section 2. 

13 SEC. 4. MISCLASSIFICATION OF EMPLOYEES FOR UNEM14 PLOYMENT COMPENSATION PURPOSES. 

15 (a) IN GENERAL.—Section 303(a) of the Social Secu16 rity Act (42 U.S.C. 503(a)) is amended— 

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

18 and inserting ‘‘; and’’; 

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

20 and inserting ‘‘; and’’; and 

21 (3) by adding after paragraph (12) the fol22 lowing: 

23 ‘‘(13)(A) Such auditing and investigative proce24 dures as may be necessary to identify employers that 

25 have not registered under the State law or that are 


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1 paying unreported wages, where these actions or 

2 omissions by the employers have the effect of exclud3 ing employees from unemployment compensation 

4 coverage; and 

5 ‘‘(B) the making of quarterly reports to the 

6 Secretary of Labor (in such form as the Secretary 

7 of Labor may require) describing the results of the 

8 procedures under subparagraph (A); and 

9 ‘‘(14) the establishment of administrative pen10 alties for misclassifying employees, or paying unre11 ported wages to employees without proper record12 keeping, for unemployment compensation pur13 poses.’’. 

14 (b) REVIEW OF AUDITING PROGRAMS.—The Sec15 retary of Labor shall include, in the Department of La16 bor’s system for measuring the performance of States in 

17 conducting unemployment compensation tax audits, a spe18 cific measure of the effectiveness of States in identifying 

19 the underreporting of wages and the underpayment of un20 employment compensation contributions (including the ef21 fectiveness of States in identifying instances of such 

22 underreporting or underpayments despite the absence of 

23 cancelled checks, original time sheets, or other similar doc24 umentation). 

25 (c) EFFECTIVE DATE.— 


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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by subsection (a) 

3 shall take effect 12 months after the date of enact4 ment of this Act. 

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

6 finds that legislation is necessary for the unemploy7 ment compensation law of a State to comply with 

8 the amendments made by subsection (a), such 

9 amendments shall not apply with respect to such law 

10 until the later of— 

11 (A) the day after the close of the first reg12 ular session of the legislature of such State that 

13 begins after the date of enactment of this Act; 

14 or 

15 (B) 12 months after the date of enactment 

16 of this Act. 

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

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

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

20 SEC. 5. DEPARTMENT OF LABOR COORDINATION, REFER21 RAL, AND REGULATIONS. 

22 (a) COORDINATION AND REFERRAL.—Notwith23 standing any other provision of law, any office, adminis24 tration, or division of the Department of Labor that, while 

25 in the performance of its official duties, obtains informaVerDate Sep 11 2014 04:28 Jul 31, 2015 Jkt 049200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1896.IS S1896

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1 tion regarding the misclassification by a person subject to 

2 the provisions of the Fair Labor Standards Act of 1938 

3 (29 U.S.C. 201 et seq.), or any order issued under such 

4 Act of any individual regarding whether such individual 

5 is an employee or a non-employee engaged in the perform6 ance of labor or services for purposes of section 6 or 7 

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

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

9 report such information to the Wage and Hour Division 

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

11 may report such information to the Internal Revenue 

12 Service as the Wage and Hour Division considers appro13 priate. 

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

15 promulgate regulations to carry out this Act and the 

16 amendments made by this Act. 

17 SEC. 6. TARGETED AUDITS. 

18 The audits of employers subject to the Fair Labor 

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

20 conducted by the Wage and Hour Division of the Depart21 ment of Labor shall include certain industries with fre22 quent incidence of misclassifying employees as non-em23 ployees, as determined by the Secretary of Labor. 

Æ 


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