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FOR IMMEDIATE RELEASE |
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State
Rep. Bryan Lentz |
  
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House passes Lentz legislation targeting unfair employer practices
HARRISBURG, June 9 – Employers would no longer be able to misclassify their workers as independent contractors to avoid paying state and federal taxes and workers’ compensation premiums under legislation the House passed Monday.
The bill’s prime sponsor, state Rep. Bryan R. Lentz, D-Delaware, said employers that misclassify their workers as independent contractors not only avoid paying their fair share of taxes, they also deprive their employees of workers' compensation, unemployment insurance, overtime and other benefits they are due.
"Misclassifying employees as independent contractors is a tax-evasion strategy," Lentz said. "Until we impose harsh penalties on the practice, workers and law-abiding employers will continue to get cheated. When we allow some unscrupulous employers to avoid responsibility to their workers, we allow them to gain a competitive advantage over the vast majority of employers who do play by the rules and who do treat their employees fairly."
Lentz’s bill (H.B. 2400) would establish that individuals who perform services in the construction or commercial carrier industries are employees of the party that pays their wages unless it can be shown to the satisfaction of the Department of Labor and Industry that they have been and will continue to be free from the direction and control of their employer; that the service performed is outside the usual course of the business of the employer; and that they are customarily engaged in an independently established trade, occupation, profession or business.
The bill would make intentional misclassification of an employee a third-degree felony and impose fines. Misclassification due to negligence would be a summary offense with fines.
Lentz said intentional misclassification of workers has been on the rise in recent years, and the practice is driving down wages and living standards for Pennsylvania workers. He also said some workers are not told about their classification as independent contractors by their employers. As a result, they do not file the tax forms required by the IRS for independent contractors, which can put them in violation of federal law.
"Not only are these
workers being shortchanged in pay and benefits, they are being put in legal jeopardy,"
Lentz said. "Others workers unknowingly sign away their benefits and
workers' compensation when they are told they must sign or risk losing their
job."
A Harvard University study recently estimated that Massachusetts was losing roughly $12.6 million to $25 million a year in unemployment insurance premiums and nearly $91 million to $152 million in income taxes because of the misclassification of employees as independent contractors. A recent Cornell University study determined that New York state is losing up to $176 million a year just in unemployment compensation insurance premiums due to the practice.
"It simply is a fairness issue," Lentz said. "Employers should not be able to do business in Pennsylvania without paying the taxes that everyone else pays, and without providing the protections and benefits to their workers that Pennsylvania law requires."
Lentz's bill now goes to the Senate for consideration.
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