A bill introduced to the U.S. Senate on Sept. 12, 2007, by Sen. Barack Obama, S.2044, commonly called the Independent Contractor Proper Classification Act of 2007, would amend the Revenue Act of 1978. Goals of the bill are to require employers to treat workers misclassified as independent contractors as employees.
According to the bill’s summary, the proper classification of these workers would ensure they are treated correctly in relation to employment tax purposes upon a determination of misclassification by the Secretary of the Treasury; repeal the ban on Treasury regulations or revenue rulings on employee/independent contractor classifications; and eliminate the defense of industry practice as a justification for misclassifying workers as independent contractors.
The bill also would require the Secretary to establish a procedure for workers to petition for a determination of their status as employees or independent contractors; would require the secretaries of the Treasury and Labor to issue annual reports and exchange information on worker misclassification cases; directs the Secretary of Labor to include on workplace posters required by the Fair Labor Standards Act (FLSA) a notice informing workers of their right to seek a status determination; and requires employers to notify their independent contractors of their federal tax obligations, labor and employment protections inapplicable to independent contractors and their right to seek a status determination from the IRS.
Employers also would be required to maintain records on independent contractors for three years, including names and tax identification numbers.
The bill was read twice before the Senate and then referred to the Committee on Finance, where it is currently being reviewed. Read the full bill, Independent Contractor Proper Classification Act of 2007.