Just a few months ago, Senator of Pennsylvania, Bob Casey, summoned a hearing of the Senate Subcommittee on Employment and Workplace Safety. The hearing was to discuss payroll fraud, also known as employee misclassification. What exactly is employee misclassification? Employee misclassification is the act of an employer improperly classifying a worker as an independent contractor rather than an employee in order to avoid paying overtime as well as other benefits and taxes. While numerous factors are looked at,  independent contractors are generally individuals who obtain customers on their own to whom  services are provided and who are not subject to control over the manner by which they perform services.

The Payroll Fraud Prevention Act (PFPA) was introduced during this hearing, which would aim to protect workers from being misclassified as independent contractors. This would therefore mean that non-exempt employees have access to fair labor standards, unemployment, health and safety protections, and workers’ compensation benefits. The PFPA would also outlaw employers from using misclassification to avoid paying their share of taxes. Companies that misclassify workers and don’t pay legally required taxes and overtime wages, under state and federal law, gain an unfair advantage over companies that do comply with the law.

The misclassification of workers is a longstanding nationwide problem that has a serious impact on workers, and this bill will be the 9th attempt to address the issue in Congress since 2007. Colorado overtime law already attempts to provide protection from misclassification of non-exempt employees as exempt employees or independent contractors and the resulting failure to pay overtime wages, but more needs to be done and the Payroll Fraud Prevention Act could be the answer. Misclassification is common among workers employed through temporary staffing companies and in industries such as the gas and oil field.

What’s the Difference Between An Employee and Independent Contractor?

If an employer as the right to direct and control a worker’s schedule and the worker is paid on a regular basis, the worker is most likely an employee. An employee will also receive predetermined earnings and will receive benefits. On the other hand, a true independent contractor is free to determine how the work gets done, is paid for each individual job, uses his own equipment, and works temporarily or on individual jobs. It’s important to note that there is no set number of factors that qualifies a worker as an independent contractor, and classification must be determined by case-by-case analysis. You can find more information on the differences between employees and independent contractors here.

If you believe you have been misclassified as an independent contractor and are not receiving the overtime pay that is rightfully yours, fill out our convenient Case Evaluation form for a FREE and CONFIDENTIAL review of your circumstances.

Michael Lore is the founder of The Lore Law Firm. For over 25 years, his law practice and experience extend from representing individuals in all aspects of labor & employment law, with a concentration in class and collective actions seeking to recover unpaid back overtime wages, to matters involving executive severance negotiations, non-compete provisions and serious personal injury (work and non-work related). He has handled matters both in the state and federal courts nationwide as well as via related administrative agencies. If you have any questions about this article, you can contact Michael by using our chat functionality.