Protecting workers’ rights in PA: Galloway’s misclassification, employee E-Verify bills pass House

HARRISBURG, June 18 – Two bills supporting workers’ rights in Pennsylvania passed the House with overwhelming bipartisan support today, announced state Rep. John Galloway, D-Bucks. 

Galloway’s two bills—H.B. 716, which would establish a task force to prevent misclassification of employees in Pennsylvania, and H.B. 1170, which would create the Construction Industry Employee Verification Act—together would help ensure an even playing field.

“I am proud that members on both sides of the aisle came together to protect workers’ rights to fair pay in Pennsylvania,” said Galloway, the prime sponsor of H.B. 716. "Pennsylvania needs a task force to prevent the misclassification of employees as independent contractors, which effectively robs the Commonwealth and workers of the pay and benefits they earned.”

Galloway said unethical employers often misclassify employees as independent contractors to save money. The practice both withholds the pay and benefits workers have earned and creates an uneven playing field for law-abiding businesses.

He said potential revenue loss due to misclassification of employees is significant. According to the Keystone Research Center, a misclassified worker loses an estimated $6,000 annually due to lost overtime pay. The center also estimates that Pennsylvania may be losing $10 million in unemployment taxes, at least $15 million in income tax revenue, as much as $83 million in workers’ compensation premiums and $200 million in federal income taxes. Misclassification can lower labor costs by as much as 30%.

The bill would amend the Administrative Code of 1929 to establish the Joint Agency Task Force on the Misclassification of Employees. Members of the task force would include Pennsylvania’s attorney general; the secretary of Revenue; and the secretary of Labor and Industry, who would serve as chair.

The task force would examine the state's current classification and enforcement system and make recommendations to strengthen enforcement, as well as educate employers and the public about employee classification under the law.

Similarly, H.B. 1170 would prevent the construction industry from knowingly hiring undocumented workers by requiring employers in the construction industry to use the E-Verify program to ensure that their employees are authorized to work in the United States.

“For far too long, bad acting employers have cut costs by misclassifying employees and hiring undocumented workers,” Galloway said. “These employers are hurting the construction industry by driving down wages, creating an unlevel playing field for other employers and depriving the government of revenue that would be used to fund programs like unemployment compensation.”

This bill, which he co-sponsored with Ryan McKenzie, R-Berks/Lehigh, would prevent employers from knowingly hiring an unauthorized employee by having to verify their work eligibility through the E-Verify program. The employer would be required to keep a record of the verification while the employee worked for them, or for three years, whichever is longer.

Under the bill, if the Department of Labor and Industry receives a complaint that an employer has hired an unauthorized employee, the employer would have time to correct/terminate the unauthorized worker and verify that they have done so with the department. If the employer fails to verify the correction, Labor and Industry would then refer the case to the attorney general to bring action against the employer in the county in which the unauthorized employee is or was employed.

Penalties for the offending employer would include a three-year probationary period for each business location where an unauthorized employee worked. In addition, these employers would have to submit quarterly reports about each new employee hired. Agencies would suspend each license an employer holds if the employer does not submit verification that they have terminated the employment of the unauthorized employee within three days.

Both bills are on their way for consideration by the Senate.