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Payroll Fraud Hurts Workers, Companies and the Economy / Casey Legislation Will Help Ensure All Workers are Classified Accurately

Washington, DC- U.S. Senator Bob Casey (D-PA), Chair of the Senate Subcommittee on Employment and Workplace Safety, chaired a hearing on payroll fraud, otherwise known as employee misclassification. Employee misclassification occurs when an employer improperly classifies a worker as an independent contractor instead of an employee.  While laws vary, in general a person is considered an employee if he or she is subject to another’s right to control the manner and means of performing the work.  In contrast, independent contractors are individuals who obtain customers on their own to provide services (and who may have other employees working for them) and who are not subject to control over the manner by which they perform services.

“Companies should not be able to cheat their employees out of fair compensation by deliberately misclassifying them,” said Senator Casey “This unscrupulous practice disadvantages law-abiding companies, impacts hard working middle class families and hurts our economy. That is why I have introduced the Payroll Fraud Prevention Act to help ensure all workers are accurately classified.”

Introduced today, the Payroll Fraud Prevention Act would protect workers from being misclassified as independent contractors, thereby ensuring access to safeguards like fair labor standards, health and safety protections, and unemployment and workers’ compensation benefits.  The Act would also prohibit employers from using misclassification to avoid paying their fair share of taxes. 

Below is a list of witnesses testifying at the hearing today:

·         Matt Anderson, Residential construction trim installer, Michigan: Anderson worked for Rush Construction as a payroll employee for six years until the last recession when Rush forced employees to switch to independent contractor status. Anderson testified about how he earned less per hour, wasn’t compensated for overtime pay, and no taxes were deducted from his check after he was misclassified.  In February of 2010, Anderson ran his left hand through a table saw blade and severely injured his fingers. His workers’ compensation claims were denied because he was considered an independent contractor. 

·         Danny Odom, Chief Operating Officer, Odom Construction Systems, Inc., Knoxville, TN: Odom Construction is primarily an interior systems contractor.  In good times Odom has had approximately 200 employees, and has bid and performed construction work in the following states:  Odom is currently working in Georgia and he also has work in Tennessee, Kentucky, Virginia, Alabama, Louisiana, Texas, North Carolina and has pending work in Michigan.  In addition to their Knoxville office, Odom has recently opened an office in Texas. 

Mr. Odom testified about his competitive disadvantage when bidding on work with other contractors who misclassify their workers.

·         Cathy Ruckelshaus, Legal Co-Director, National Employment Law Project, New York, NY: Ms. Ruckelshaus joined NELP in 1995 after working for the Employment Law Center in San Francisco.  For over 20 years, she has litigated and advocated for policy reforms promoting the workplace rights of immigrant and non-standard workers (part-time, temporary and subcontracted workers), enforcement of wage and hour and workplace laws, and anti-discrimination and family and medical leave laws.  She has litigated class action lawsuits in state and federal court and authored several amicus briefs before the U.S. Supreme Court and U.S. Courts of Appeal.  Ms. Ruckelshaus discussed the effect misclassification has on workers and discuss why Federal legislation is still needed.

·         Christopher MacKrell, President of Custom Courier Solutions, Inc., Saratoga Springs, NY: Minority Witness Custom Courier Solutions is a full service transportation organization based in Saratoga Springs, New York. Custom Courier Solutions, Inc. provides the full range of logistic services to the less than 24 hour delivery market.

Prior to Custom Courier Solutions, Inc. Mr. MacKrell was with CD&L, a full service transportation company based in Hackensack, New Jersey, where he held the position of Manager of Business Development and oversaw the company’s sales effort in the Northeast. Prior to joining CD&L, Mr. MacKrell was Regional Vice President-East overseeing the field sales and ground operations of AirNet Systems eastern US operations. AirNet operates a fleet of turbo and jet powered aircraft servicing the Banking and Medical industry based in Columbus, Ohio.

Prior to AirNet Systems Mr. MacKrell was employed by Velocity Express, and its predecessor companies, in various National Sales and Senior operations position in the Northeast. Mr. MacKrell has been active in the transportation industry since 1982.