I

105TH CONGRESS

1ST SESSION H. R. 770

To amend title 10, United States Code, to ensure proper classification as

employees and independent contractors of persons awarded Federal procurement contracts.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 13, 1997

Mr. LANTOS (for himself and Mr. SHAYS) introduced the following bill; which

was referred to the Committee on National Security

A BILL

To amend title 10, United States Code, to ensure proper

classification as employees and independent contractors

of persons awarded Federal procurement contracts.

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

3 SECTION 1. CLASSIFICATION OF PERSONS AS EMPLOYEES

4 AND INDEPENDENT CONTRACTORS UNDER

5 DEFENSE CONTRACTS.

6 (a) IN GENERAL.—Chapter 137 of title 10, United

7 States Code, is amended by adding at the end the follow8 ing new section:
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1 ‘‘§ 2332. Classification of persons as employees and

2 independent contractors

3 ‘‘(a) INELIGIBILITY FOR DEFENSE CONTRACTS AND

4 SUBCONTRACTS.—

5 ‘‘(1) IN GENERAL.—A person (including any

6 subsidiary, successor, or related entity of a person)

7 shall not be eligible for any defense contract during

8 the two-year period beginning on the date of the is9 suance of any final determination under Federal law

10 that the person (including any subsidiary or related

11 entity of the person) willfully misclassified an indi12 vidual for purposes of any employment tax.

13 ‘‘(2) FINAL DETERMINATION.—For purposes of

14 this subsection, a determination is final if all rights

15 to appeal the determination, or to request a review,

16 rehearing, or redetermination of the matter that is

17 the subject of the determination, have been ex18 hausted or have lapsed.

19 ‘‘(b) CERTIFICATION OF ADEQUACY OF BIDS TO PAY

20 EMPLOYMENT TAXES.—A person who submits a bid or

21 proposal for a defense contract shall certify that the

22 amount of the bid or proposal is adequate to pay all em23 ployment taxes with respect to all work to be performed

24 under the contract by employees of the person.

25 ‘‘(c) NOTIFICATION OF INDEPENDENT CONTRAC26 TORS.—Each defense contract shall include a requirement
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1 that the contractor shall provide, to each person who per2 forms work under the contract and who is treated by the

3 contractor as an independent contractor for purposes of

4 employment taxes, a notification regarding—

5 ‘‘(1) all obligations of the independent contrac6 tor under Federal and State law to withhold and pay

7 employment taxes with respect to work performed

8 under the contract by the independent contractor

9 (including work performed by employees of the inde10 pendent contractor); and

11 ‘‘(2) all statutory rights and protections that

12 are available under Federal and State law to em13 ployees of the contractor and are not available to the

14 independent contractor (including employees of the

15 independent contractor), including protections and

16 benefits under Federal laws relating to fair labor

17 standards, occupational health and safety, civil

18 rights, unemployment insurance, and worker’s com19 pensation.

20 ‘‘(d) RIGHT OF ACTION.—A person who submits a

21 bid or proposal for a defense contract and who suffers

22 damages as a result of the award of the contract to a per23 son who knowingly and willfully submits a certification

24 under subsection (b) with respect to the contract that is

25 false, may bring an action for damages against the person
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1 awarded the contract in any district court of the United

2 States in which the defendant is located.

3 ‘‘(e) DEFINITIONS.—For purposes of this section:

4 ‘‘(1) EMPLOYMENT TAX.—The term ‘employ5 ment tax’ means any tax imposed by subtitle C of

6 the Internal Revenue Code of 1986.

7 ‘‘(2) DEFENSE CONTRACT.—The term ‘defense

8 contract’ means a contract awarded by the Depart9 ment of Defense, and all subcontracts under such a

10 contract.

11 ‘‘(3) MISCLASSIFY.—The term ‘misclassify’

12 means to treat as an independent contractor an indi13 vidual who is an employee.’’.

14 (b) CLERICAL AMENDMENT.—The table of sections

15 at the beginning of such chapter is amended by adding

16 at the end the following new item:

‘‘2332. Classification of persons as employees and independent contractors.’’.

17 SEC. 2. APPLICABILITY.

18 Section 2332 of title 10, United States Code, as

19 added by section 1, shall apply to—

20 (1) defense contracts entered into after the ex21 piration of the 180-day period beginning on the date

22 of the enactment of this Act;

23 (2) subcontracts under contracts covered by

24 paragraph (1); and
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1 (3) options exercised under any defense con2 tract after the expiration of the 180-day period be3 ginning on the date of the enactment of this Act.

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