Progress is being made in the fight against employee misclassification, most recently in the District of Columbia. Employee misclassification is the practice of labeling workers as independent contractors, rather than employees.
Misclassification is unfair to law-abiding employers that pay unemployment insurance taxes and provide workers’ compensation coverage for their employees. They also face a competitive disadvantage when bidding against misclassifying companies. Misclassified workers aren’t given a fair deal either – the protection of labor laws such as family and medical leave, overtime, minimum wage and unemployment insurance.
The District of Columbia’s new construction industry misclassification law, the Workplace Fraud Act (DC B 169) prohibits an employer from misclassifying an employee as an independent contractor.
The consequences to employers for violating the law are steep:
- Significant civil penalties for violations or retaliation
- Worker lawsuits seeking up to treble damages for lost wages and benefits
- Payment of restitution, benefits, tax or other required amounts
- Stop-work orders and public contract debarment
The law requires employers to keep records pertaining to both employees and independent contractors for three years. Employers are also required to provide independent contractors written notice of their status and the implications of such status.
The law is already in effect and employers must comply. However, regulations that implement the new law may be later developed.