09.13.07

OBAMA, DURBIN, KENNEDY, MURRAY FIGHT AGAINST MISCLASSIFICATION OF WORKERS Bill will help close the tax gap, ensure benefits for workers, restore fair playing field for employers

WASHINGTON, D.C. – This week, U.S. Senators Barack Obama (D-IL), Dick Durbin (D-IL),Edward M. Kennedy (D-MA) and Patty Murray (D-WA) introduced The Independent ContractorProper Classification Act of 2007. This legislation will protect workers and taxpayers againstthe misclassification of employees, a problem that costs the government billions of dollars anddenies thousands of Americans basic employee protections such as workers compensation andovertime pay. The Section 530 Safe Harbor in federal tax law is a tax loophole that allows employers toclassify a worker as an "independent contractor" instead of an "employee." Employers who usethis loophole avoid paying employment taxes and workers compensation for their workers. Asa result, misclassified workers must pay higher taxes as though they are self employed. Incontrast, employers who follow the rules are forced to pay higher federal and state payrolltaxes, putting them at a competitive disadvantage against employers misclassifying theirworkers. The Independent Contractor Proper Classification Act of 2007 will close the Section 530loophole. It will allow the government to collect the taxes employers owe and will address theneed for more enforcement of federal tax and employment laws to identify those employers inmajor industries who wrongly classify their workers as independent contactors and requiregreater cooperation between the IRS and the Department of Labor in enforcing the law. “Every day, millions of Americans go to work and play by the rules, teaching our children thevalues of hard work and responsibility,” Senator Obama said. “And most employers treat theirworkers fairly, paying them a decent wage and providing the benefits they deserve. But wemust fix the system to stop those few employers from breaking the rules and exploiting thistax loophole at the expense of taxpayers and our workers’ safety and security. I want tothank Senators Durbin, Kennedy, Murray and the labor community and trade associations fortheir support of this bill.” “When you walk down the streets of Chicago, and in the suburbs and towns throughoutIllinois, you can see constructions workers hard at work - building new homes, office buildings,and roads,” said Senator Durbin. “These workers deserve their fair share from employers whoare not trying to cheat the system. This bill will make important changes at the federal levelthat will complement the actions the State is taking to make sure employers properly classifytheir workers. I commend Senators Obama, Kennedy and Murray for their work onintroducing this important legislation.” “Improperly labeling workers as independent contractors is cheating of the worst kind,”Senator Kennedy said. “Companies resorting to this dishonest practice avoid paying the taxesthey owe and deny their employees their legal rights, including the right to a safe workplace,the right to the minimum wage, and the right to overtime pay. I’m proud to be a sponsor ofthis legislation to crack down on these unscrupulous employers.”“Good faith employers and hard working Americans should be served by the law, not harmedby it,” said Senator Murray. “I’m pleased that this bill will level the playing field for employersand give working families access to the benefits and protections they deserve.”The legislation is supported by the AFL-CIO, Change to Win, the International Brotherhood ofTeamsters, business associations representing the interests of more than 200,000construction employers, and the National Employment Law Project. ###

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