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[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 3648 Introduced in Senate (IS)]

110th CONGRESS
  2d Session
                                S. 3648

  To amend the Fair Labor Standards Act to require employers to keep 
records of non-employees who perform labor or services for remuneration 
    and to provide a special penalty for employers who misclassify 
          employees as non-employees, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

           September 29 (legislative day, September 17), 2008

 Mr. Reid (on behalf of Mr. Kennedy) (for himself, Mr. Obama, and Mr. 
Kerry) 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 to require employers to keep 
records of non-employees who perform labor or services for remuneration 
    and to provide a special penalty for employers who misclassify 
          employees as non-employees, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Employee Misclassification 
Prevention Act''.

SEC. 2. CLASSIFICATION OF EMPLOYEES AND NON-EMPLOYEES.

    (a) Recordkeeping and Notice Requirements.--Section 11(c) of the 
Fair Labor Standards Act of 1938 (29 U.S.C. 211(c)) is amended--
            (1) by striking ``Every employer'' and inserting ``(1) 
        Every employer'';
            (2) by striking ``the persons employed by him'' and 
        inserting ``(A) the persons employed by such employer'';
            (3) by striking ``maintained by him'' and inserting ``, (B) 
        the individuals who are not employees of the employer (within 
        the meaning of section 3(g)) but with whom the employer, in the 
        course of the trade or business in which the employer is 
        engaged, has engaged for the performance of labor or services, 
        and of the remuneration relating to the performance of labor or 
        services by such individuals, and (C) the notices required 
        under paragraph (3),''; and
            (4) by inserting at the end the following:
    ``(2) All records under this subsection shall contain an accurate 
classification of the status of each individual described in paragraph 
(1) as either an employee of the employer (within the meaning of 
section 3(g)) or a non-employee engaged by the employer for the 
performance of labor or services.
    ``(3)(A) Every employer subject to any provision of this Act or any 
order issued under this Act shall provide the notice described in 
subparagraph (C) to each employee of the employer and each individual 
classified under paragraph (2) as a non-employee engaged by the 
employer for the performance of labor or services.
    ``(B) Such notice shall be provided, at minimum, not later than 6 
months after the date of enactment of the Employee Misclassification 
Prevention Act, and thereafter for new employees, upon employment, and 
for non-employees engaged for the performance of labor or services, 
upon commencement of the services subject to such contract. Every 
employer shall also provide such notice to any individual upon changing 
such individual's status as an employee or non-employee under paragraph 
(2).
    ``(C) The notice required under this paragraph shall be in writing 
and shall--
            ``(i) inform the individual of the employer's 
        classification of the individual as an employee or a non-
        employee under paragraph (2);
            ``(ii) include a statement directing such individual to a 
        Department of Labor website established for the purpose of 
        providing further information about the rights of employees 
        under the law;
            ``(iii) include the address and telephone number for the 
        applicable local office of the Federal Department of Labor;
            ``(iv) include for those individuals classified by the 
        employer as a non-employee under paragraph (2), the following 
        statement: `Your rights to wage, hour, and other labor 
        protections depend upon your proper classification as an 
        employee or non-employee. If you have any questions or concerns 
        about how you have been classified or suspect that you may have 
        been misclassified, contact the U.S. Department of Labor.'; and
            ``(v) include such additional information as the Secretary 
        shall prescribe by regulation.''.
    (b) Special Prohibited Act.--Section 15(a) of such Act is amended 
by adding at the end the following:
            ``(6) to fail to accurately classify an individual in 
        accordance with section 11(c).''.
    (c) Special Penalty for Certain Recordkeeping and Notice 
Violations.--Section 16 of the Fair Labor Standards Act of 1938 (29 
U.S.C. 216) is amended--
            (1) in subsection (b)--
                    (A) in the third sentence, by striking ``either of 
                the preceding sentences'' and inserting ``any of the 
                preceding sentences''; and
                    (B) by inserting after the first sentence the 
                following: ``Such liquidated damages are doubled 
                (subject to section 11 of the Portal-to-Portal Pay Act 
                of 1947 (29 U.S.C. 260)) where, in addition to 
                violating the provisions of section 6 or 7, the 
                employer has violated the provisions of section 
                15(a)(6) with respect to such employee or employees.''; 
                and
            (2) in subsection (e), after the first sentence in the 
        matter preceding paragraph (1), by inserting the following: 
        ``Any person who repeatedly or willfully violates section 
        15(a)(6) shall be subject to a civil penalty of not to exceed 
        $10,000 for each such violation.''.
    (d) Employee Rights Website.--Not later than 90 days after the date 
of enactment of this Act, the Secretary of Labor shall establish, for 
purposes of section 11(c)(3)(C)(ii) of the Fair Labor Standards Act of 
1938 (as added by this Act), a single web page on the Department of 
Labor website that summarizes in plain language the rights of employees 
under the Fair Labor Standards Act and other Federal laws. Such web 
page shall contain appropriate links to additional information on the 
Department of Labor website or other Federal agency websites, including 
wage and hour complaint forms, along with a statement explaining that 
employees may have additional or greater rights under State or local 
laws and how employees may obtain additional information about their 
rights under State or local laws. Such web page shall be made available 
in English and any other languages which the Secretary determines to be 
prevalent among individuals likely to access the web page. The 
Secretary shall coordinate with other relevant Federal agencies in 
order to provide similar information (or a link to the Department of 
Labor web page required by this subsection) on the websites of such 
other agencies.

SEC. 3. MISCLASSIFICATION OF EMPLOYEES FOR UNEMPLOYMENT COMPENSATION 
              PURPOSES.

    (a) In General.--Section 303(a) of the Social Security Act (42 
U.S.C. 503(a)) is amended--
            (1) in paragraph (10), by striking the period and inserting 
        ``; and''; and
            (2) by adding after paragraph (10) the following:
            ``(11)(A) Such auditing and investigative programs as may 
        be necessary to identify employers that have not registered 
        under the State law or that are paying unreported compensation, 
        where these actions or omissions by the employers have the 
        effect of excluding employees from unemployment compensation 
        coverage; and
            ``(B) The making of quarterly reports to the Secretary of 
        Labor (in such form as the Secretary of Labor may require) 
        describing the results of programs under subparagraph (A); and
            ``(12) The establishment of administrative penalties for 
        misclassifying employees, or paying unreported compensation to 
        employees without proper recordkeeping, for unemployment 
        compensation purposes.''.
    (b) Review of Auditing Programs.--The Secretary of Labor shall 
include, in the Department of Labor's system for measuring States' 
performance in conducting unemployment compensation tax audits, a 
specific measure of their effectiveness in identifying the 
underreporting of wages and the underpayment of unemployment 
compensation tax contributions (including their effectiveness in 
identifying instances of such underreporting or underpayments despite 
the absence of cancelled checks, original time sheets, or other similar 
documentation).
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by subsection (a) shall take effect 12 months 
        after the date of the enactment of this Act.
            (2) Exception.--If the Secretary of Labor finds that 
        legislation is necessary in order for the unemployment 
        compensation law of a State to comply with the amendments made 
        by subsection (a), such amendments shall not apply with respect 
        to such law until the later of--
                    (A) the day after the close of the first session of 
                the legislature of such State which begins after the 
                date of the enactment of this Act; or
                    (B) 12 months after the date of the enactment of 
                this Act.
    (d) Definitions.--For purposes of this section--
            (1) the term ``State'' has the meaning given such term by 
        section 3306(j) of the Internal Revenue Code of 1986 (26 U.S.C. 
        3306(j)); and
            (2) the term ``session'', as used with respect to a State 
        legislature, means a regular, special, budget, or other session 
        of such legislature.

SEC. 4. DEPARTMENT OF LABOR COORDINATION AND REFERRAL.

    Notwithstanding any other provision of law, any office, 
administration, or division of the Department of Labor that, while in 
the performance of its official duties, obtains information regarding 
the misclassification by an employer of any individual regarding 
whether such individual is an employee or a non-employee contracted for 
the performance of services for purposes of section 6 or 7 of the Fair 
Labor Standards Act or in records required under section 11(c) of such 
Act, shall report such information to the Employment Standards 
Administration of the Department. The Employment Standards 
Administration may report such information to the Internal Revenue 
Service as the Administration considers appropriate.

SEC. 5. TARGETED AUDITS.

    The Secretary of Labor shall ensure that at least 25 percent of the 
audits of employers subject to the Fair Labor Standards Act that are 
conducted by the Wage and Hour Division of the Department of Labor are 
focused on potential violations of the recordkeeping requirements of 
section 11(c) of such Act (29 U.S.C. 211(c)) (as amended by this Act). 
Such Division shall focus such audits on employers in industries with 
frequent incidence of misclassifying employees as non-employees, as 
determined by the Secretary.
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