1099 Risk Blog

Time To Say Goodbye (to Safe Harbor): Kerry Advances Reform Legislation

In a year-end move that should have surprised absolutely no one, Senator Kerry introduced a bill on December 15th 2009 that would make it more difficult for employers to classify workers as independent contractors for purposes of avoiding employment taxes. The Taxpayer Responsibility, Accountability, and Consistency Act of 2009 (S. 2882) would revise Section 530 of the Revenue Act of 1978, known as the “Safe Harbor” provision, which currently allows employers to designate workers as independent contractors . . .

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Independent Contractor Bill Reintroduced in Congress

Congressman Jim McDermott (D-Wash) introduced H.R.3408, The Taxpayer Responsibility, Accountability and Consistency Act of 2009 in Congress. Sound familiar? This is substantially the same piece of legislation as H.R.5804 of the same title from 2008. The bill would repeal Section 530 (Safe Harbor) of the Revenue Act of 1978. The bill has 6 co-sponsors, compared to H.R.5804 which had won the support of 37 co-sponsors before dying an untimely death . . .

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Budget Crisis of the Undead

Our zombie news item for today is the grotesque revival of a proposed California budget fix that includes a 3% tax withholding for independent contractors. For those of you who don’t know what I am talking about, read on: this might be fun; I’m going to make yet another bold prognostication (see my last one on E-Verify). Withholding taxes on independent contractors? If you are feeling some déjà vu, it’s not just you. This zombie of a proposal has been raised and killed so many times . . .

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House Bill Would Penalize Misclassification

The flurry of introduced legislation intended to address employee misclassification continues: A new bill introduced in the House by Democratic Representatives Woolsey and Andrews would penalize employers who improperly classify their employees as contractors to save on payroll taxes, benefits, and other costs.

The Employee Misclassification Prevention Act would amend the Fair Labor Standards Act to clarify language around employee -- contractor classification [i.e., whether individuals should be paid as a W2 or a 1099], increase reporting and communications between the . . .

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Rep. McDermott introduces new worker classification legislation

Turning up the heat:

Proper classification of contractors and employees continues to hit the headlines on a regular basis, and the latest news is the release of yet another legislative effort to eliminate worker misclassification and help state and federal tax agencies recover more revenues without raising taxes. Representatives McDermott, Tierney, and Neal introduced The Taxpayer Responsibility, Accountability, and Consistency Act in session yesterday. Adding fuel to the fire, the labor Unions have issued a variety of press releases today praising the measure. The Unions argue that misclassification as contractors prevents workers from being able to join and therefore infringes on their right to organize.

Granted that this is an election year and a variety of powerful lobbies (and not just the unions) are interested in passing this kind of legislation, interest and pressure in the topic of worker classification will only increase in the coming months.

We'll be adding this bill to our Legislation Tracker page as soon as it becomes available on GovTrack, so stay tuned to these pages!

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Obama's IC Bill Still In Committee

Senator Obama's Senate bill confronting independent contractor classification is currently in the Senate Finance Committee. In case you haven't been tracking this issue, the bill was introduced last September and would allow the U.S. Treasury to wield a whole lot more power than it currently does. In one sense it would 'take the muzzle off' the dogs of enforcement. In addition, the bill will also eliminate the "everybody's doing it" defense of industry practice as a justification for worker misclassification.

If the bill becomes law, it would dramatically shift the landscape of contractor classification. Industries known to habitually misclassify workers would be fair game for investigation, and information for workers about proper classification would be added to the Department of Labor's workplace signage to help make sure every worker understands their labor rights.

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