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SECTION 1. SHORT TITLE.

This Act may be cited as the ''Payroll Fraud Prevention Act of
2017''.

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

(a) Definitions.--Section 3 of the Fair Labor Standards Act of 1938
(29 U.S.C. 203) is amended by adding at the end the following:
''(z) 'Non-employee' means an individual who--
''(1) has been engaged, in the course of the trade or
business of the person, for the performance of labor or
services; and
''(2) is not an employee of the person.
''(aa) 'Covered individual' when used with respect to an employer
or other person means--
''(1) an employee of the employer; or
''(2) a non-employee of the person (including a person who
is an employer)--
''(A) whom the person has engaged, in the course of
the trade or business of the person, for the
performance of labor or services; and
''(B)(i) with respect to whom the person is
required to file an information return under section
6041A(a) of the Internal Revenue Code of 1986; or
''(ii) who is providing labor or services to the
person through an entity that is a trust, estate,
partnership, association, company, or corporation (as
such terms are used in section 7701(a)(1) of the
Internal Revenue Code of 1986) if--
''(I) such individual has an ownership
interest in the entity;
''(II) creation or maintenance of such
entity is a condition for the provision of such
labor or services to the person; and
''(III) the person would be required to
file an information return for the entity under
section 6041A(a) of the Internal Revenue Code
of 1986 if the entity were an individual.''.
(b) Classification as Employees.--Section 11(c) of the Fair Labor
Standards Act of 1938 (29 U.S.C. 211(c)) is amended--
(1) by striking ''(c) Every employer subject to any
provision of this Act or of any order issued under this Act''
and inserting the following:
''(c) Recordkeeping; Classification; Notice.--
''(1) Recordkeeping.--Every person subject to any provision
of this Act or of any order issued under this Act''; and
(2) by adding at the end the following:
''(2) Classification.--Every person (including every
employer and enterprise), who employs any employee engaged in
commerce or in the production of goods for commerce or engages
any non-employee engaged in commerce or in the production of
goods for commerce, shall accurately classify each covered
individual as an employee or a non-employee (as the case may
be).
''(3) Notice.--
''(A) In general.--Every person subject to any
provision of this Act or of any order issued under this
Act shall provide the notice described in subparagraph
(C) to each employee of the person and each individual
classified by the person as a non-employee under
paragraph (2) and maintain a copy of such notice as a
required record under paragraph (1).
''(B) Timing of notice.--
''(i) In general.--The notice described in
subparagraph (A) shall be provided, at a
minimum, to each covered individual not later
than 6 months after the date of enactment of
the Payroll Fraud Prevention Act of 2017, and
thereafter--
''(I) for each new employee, upon
employment; and
''(II) for each new non-employee,
upon commencement of the labor or
services provided by the non-employee.
''(ii) Change in status.--Each person
required to provide a notice under subparagraph
(A) to a covered individual shall also provide
such notice to such individual upon changing
the status of such individual as an employee or
a non-employee.
''(C) Contents of notice.--The notice required
under this paragraph shall be in writing and shall--
''(i) inform the covered individual of the
classification of such individual, by the
person submitting the notice, as an employee or
a non-employee;
''(ii) include a statement directing such
individual to the Department of Labor website
established under section 3 of the Payroll
Fraud Prevention Act of 2017, for the purpose
of providing further information about the
legal rights of an employee;
''(iii) include the address and telephone
number for the applicable local office of the
Department of Labor; and
''(iv) include for each covered individual
classified as a non-employee by the person
providing the notice, the following statement:
'Your rights to wage, hour, and other labor
protections depend upon your proper
classification as an employee or a 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.'.
''(D) Presumption.--
''(i) In general.--For purposes of this Act
and the regulations or orders issued under this
Act, a covered individual to whom a person is
required to provide a notice under subparagraph
(A) shall be presumed to be an employee of the
person if the person has not provided the
individual with such notice within the time
required under subparagraph (B).
''(ii) Rebuttal.--The presumption under
clause (i) shall be rebutted only through the
presentation of clear and convincing evidence
that a covered individual described in such
subparagraph is not an employee of the
person.''.
(c) Special Prohibited Acts.--Section 15(a) of the Fair Labor
Standards Act of 1938 (29 U.S.C. 215(a)) is amended--
(1) by striking paragraph (3) and inserting the following:
''(3) to discharge or in any other manner discriminate
against any covered individual (including an employee) because
such individual has--
''(A) opposed any practice, filed any petition or
complaint, or instituted or caused to be instituted any
proceeding--
''(i) under or related to this Act
(including concerning the status of a covered
individual as an employee or a non-employee for
purposes of this Act); or
''(ii) concerning the status of a covered
individual as an employee or a non-employee for
employment tax purposes within the meaning of
subtitle C of the Internal Revenue Code of
1986;
''(B) testified or is about to testify in any
proceeding described in subparagraph (A); or
''(C) served, or is about to serve, on an industry
committee;'';
(2) in paragraph (5), by striking the period at the end and
inserting ''; and''; and
(3) by adding at the end the following:
''(6) to wrongly classify an employee of the person as a
non-employee in accordance with section 11(c)(2).''.
(d) Special Penalty for Certain Misclassification, 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 sixth sentence, by striking ''any
employee'' each place the term occurs and inserting
''any covered individual'';
(B) in the fourth sentence--
(i) by striking ''employees'' and inserting
''covered individual''; and
(ii) by striking ''he gives his consent''
and inserting ''such covered individual
consents'';
(C) in the third sentence--
(i) by striking ''either of the preceding
sentences'' and inserting ''any of the
preceding sentences'';
(ii) by striking ''one or more employees''
and inserting ''one or more covered
individuals''; and
(iii) by striking ''in behalf of himself or
themselves and other employees'' and inserting
''on behalf of such covered individual or
individuals and other covered individuals'';
and
(D) by inserting after the first sentence the
following: ''Such liquidated damages are doubled
(subject to section 11 of the Portal-to-Portal 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), by striking paragraph (2) and
inserting the following:
''(2) Any person who violates section 6, 7, 11(c), or
15(a)(6) shall be subject to a civil penalty, for each employee
or other individual who was the subject of such a violation, in
an amount--
''(A) not to exceed $1,100; or
''(B) in the case of a person who has repeatedly or
willfully committed such violation, not to exceed
$5,000.''.

SEC. 3. EMPLOYEE RIGHTS WEBSITE.

Not later than 180 days after the date of enactment of this Act,
the Secretary of Labor shall establish a single webpage on the
Department of Labor website that summarizes in plain language the
rights of employees and non-employees under the Fair Labor Standards
Act of 1938 (29 U.S.C. 201 et seq.), including the rights described in
the amendments made by section 2.

SEC. 4. 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 (11)(B), by striking the period and
inserting ''; and'';
(2) in paragraph (12), by striking the period and inserting
''; and''; and
(3) by adding after paragraph (12) the following:
''(13)(A) Such auditing and investigative procedures as may
be necessary to identify employers that have not registered
under the State law or that are paying unreported wages, 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 the procedures under subparagraph
(A); and
''(14) The establishment of administrative penalties for
misclassifying employees, or paying unreported wages 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 the
performance of States in conducting unemployment compensation tax
audits, a specific measure of the effectiveness of States in
identifying the underreporting of wages and the underpayment of
unemployment compensation contributions (including the effectiveness of
States in identifying instances of such underreporting or underpayments
despite the absence of canceled 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 enactment of this Act.
(2) Exception.--If the Secretary of Labor finds that
legislation is necessary 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 regular
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, REFERRAL, AND REGULATIONS.

(a) 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 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
performance 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 appropriate.
(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 Department of Labor shall include certain industries
with frequent incidence of misclassifying employees as non-employees,
as determined by the Secretary of Labor.
Output:
Payroll Fraud Prevention Act of 2017 This bill amends the Fair Labor Standards Act of 1938 to require employers to accurately classify their employees or non-employees as employees or independent contractors and to notify such employees or non-employees of their classification. The bill makes it unlawful for any person to: (1) discharge or otherwise discriminate against an employee or non-employee who has filed a complaint with respect to their employment classification, and (2) wrongly classify an employee as a non-employee. The bill doubles the amount of liquidated damages for unpaid wages and misclassifications of employees. The bill amends the Social Security Act to: (1) require, as a condition for the federal grant program for unemployment compensation administration, auditing and investigative procedures to identify employers who are not registered under state law or who are paying unreported wages; and (2) impose administrative penalties for misclassification of employees or payment of unreported wages without proper recordkeeping. The bill requires the Department of Labor to report any misclassification of an employee to its Wage and Hour Division. The Wage and Hour Division is then authorized to report a misclassification to the Internal Revenue Service.