While Congress ponders the Employee Misclassification Prevention Act, several states are studying ways to target employers that misclassify their employees as independent contractors.
Minnesota is part of a joint task force studying the misclassification problem. Other task force states are Illinois, Iowa, New York, Washington, Maine, New Hampshire, Vermont, Massachusetts and Rhode Island.
Connecticut Attorney General and Democratic U.S. Senate candidate Richard Blumenthal released his own report calling for greater fines of scrutiny of employers that file 1099s, and greater fines for those who misclassify employees.
That mirrors the likely federal approach. Whether tougher regulation comes from the states or the feds, look for bigger fines for violators, tougher requirements to inform workers of their status, stiffer penalties for retaliating against workers who dispute their status and—significantly—more government auditing of worker classification practices and documents.
Note: With all levels of government facing growing deficits, employee misclassification is just the type of high-profile, politically popular move politicians love. Employers should review all independent contractor relationships to ensure the contractors truly are independent. The U.S Department of Labor and the IRS will look at how much control the employer exerts over the employee/contractor and whether the contractor is truly independent enough to work for other clients as well. Review these with your attorney to determine whether your contractors should be employees or not.