paying unreported wages, where these actions or 
omissions by the employers have the effect of exclud-
ing 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 the 
procedures under subparagraph (A); and 
‘‘(14) the establishment of administrative pen-
alties for misclassifying employees, or paying unre-
ported wages to employees without proper record-
keeping, for unemployment compensation pur-
poses.’’. 
(b) REVIEW
OF AUDITING PROGRAMS.—The Sec-
retary of Labor shall include, in the Department of La-
bor’s system for measuring the performance of States in 
conducting unemployment compensation tax audits, a spe-
cific measure of the effectiveness of States in identifying 
the underreporting of wages and the underpayment of un-
employment compensation contributions (including the ef-
fectiveness of States in identifying instances of such 
underreporting or underpayments despite the absence of 
cancelled checks, original time sheets, or other similar doc-
umentation). 
(c) EFFECTIVE DATE.— 
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(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by subsection (a) 
shall take effect 12 months after the date of enact-
ment of this Act. 
(2) EXCEPTION.—If the Secretary of Labor 
finds that legislation is necessary for the unemploy-
ment 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 reg-
ular session of the legislature of such State that 
begins after the date of enactment of this Act; 
or 
(B) 12 months after the date of enactment 
of this Act. 
(d) DEFINITION OF STATE.—For purposes of this 
section, the term ‘‘State’’ has the meaning given the term 
in section 3306(j) of the Internal Revenue Code of 1986. 
SEC. 5. DEPARTMENT OF LABOR COORDINATION, REFER-
RAL, AND REGULATIONS. 
(a) 
COORDINATION
AND
REFERRAL.—Notwith-
standing any other provision of law, any office, adminis-
tration, or division of the Department of Labor that, while 
in the performance of its official duties, obtains informa-
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tion regarding the misclassification by a person subject to 
the provisions of the Fair Labor Standards Act of 1938 
(29 U.S.C. 201 et seq.), or any order issued under such 
Act of any individual regarding whether such individual 
is an employee or a non-employee engaged in the perform-
ance of labor or services for purposes of section 6 or 7 
of such Act (29 U.S.C. 206, 207), or in records required 
under section 11(c) of such Act (29 U.S.C. 211(c)), shall 
report such information to the Wage and Hour Division 
of the Department of Labor. The Wage and Hour Division 
may report such information to the Internal Revenue 
Service as the Wage and Hour Division considers appro-
priate. 
(b) REGULATIONS.—The Secretary of Labor shall 
promulgate regulations to carry out this Act and the 
amendments made by this Act. 
SEC. 6. TARGETED AUDITS. 
The audits of employers subject to the Fair Labor 
Standards Act of 1938 (29 U.S.C. 201 et seq.) that are 
conducted by the Wage and Hour Division of the Depart-
ment of Labor shall include certain industries with fre-
quent incidence of misclassifying employees as non-em-
ployees, as determined by the Secretary of Labor. 
Æ 
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