With Highway Trust Fund Set to Expire, Sen. Brown Announces Bill That Would Raise Funds For Transportation Projects and Protect Workers and Businesses by Addressing Tax Fraud and Worker Misclassification

Brown’s Bill Would Help Ensure that Full-Time Employees are no Longer Misclassified as Independent Contractors, Providing Workers Important Benefits and Protections Brown’s Legislation Could Raise $5.7 Billion over 10 years, Help Pay for Short Term Highway Bill that Would Protect Jobs and Rebuild America’s Infrastructure

WASHINGTON, D.C. – With the Highway Trust Fund facing insolvency, which could cost Ohio millions of dollars, U.S. Sen. Sherrod Brown (D-OH) held a news conference call today to announce legislation that would raise funds for job-creating infrastructure projects while protecting workers and businesses that play by the rules. The Fair Playing Field Act would ensure that fulltime employees are no longer misclassified as independent contractors, which not only allows employers to deny employees basic workplace protections, but also deprives local and state governments billions of dollars in tax revenue and puts businesses that do play by the rules at a competitive disadvantage. Brown’s legislation would also raise enough revenue to help fund a short term transportation bill.

“When employers misclassify employees, workers, other businesses, and taxpayers lose. But time and time again, employers use loopholes to protect their profits at the expense of the workers and businesses that play fairly,” Brown said. “If employees are classified as independent contractors, then an employer doesn’t have to pay them the benefits they’ve earned. This isn’t right, and the Fair Playing Field Act would allow the IRS to put a stop to this. Not only would it protect workers and their families, but it would strengthen the economy by reducing the deficit and allow businesses to compete on an equal playing field.

“Further, funding transportation projects is vital to strengthening our nation’s economic competitiveness and ensuring that thousands of hardworking Ohioans continue to rebuild our bridges and roads,” Brown continued. “The Fair Playing Field Act is a commonsense way to raise enough revenue to help the government pay for a short term transportation bill.”

Worker misclassification is widespread in sectors like construction, transportation, maintenance and janitorial services, agriculture, and child care—industries that employ some of the lowest-paid and most vulnerable American workers. By classifying workers as independent contractors rather than employees under Federal tax law, employers can avoid paying payroll taxes, unemployment insurance and workers’ compensation. Workers who are classified as independent contractors are also denied the protection of critical labor laws such as the Fair Labor Standards Act and the National Labor Relations Act, including minimum wage and overtime rules and the right to unionize. 

Further, businesses that misclassify their workers can avoid many of their tax obligations, depriving governments of much needed revenues and adding to the federal deficit. In fact, the Government Accountability Office (GAO) estimates that the Federal government loses billions of dollars annually in Social Security, unemployment insurance, and income tax revenue due to misclassification.

Finally, businesses that do play by the rules and properly classify their workers lose business to competitors who do not. This hurts the local economy and stagnates job growth. That is why Brown introduced the Fair Playing Field Act, which would address this problem and help put a stop to it by:

  • Requiring the Internal Revenue Service (IRS) to offer clarification on the rule determining the Federal tax employment status of a worker; and offer guidance in order to make this distinction easier for employees and employers to decipher; 
  • Ending the moratorium on the IRS prospectively reclassifying workers;
  • Requiring that employers notify their independent contractors of their tax obligations and the workplace protections that do not apply to them. If independent contractors have concerns about their classification, Brown’s bill would give them the right to seek a determination of their proper employment status from the IRS;
  • Permanently protecting professional services employees who are independent contractors by choice from being reclassified;
  • Protecting employers who follow the rules. It retains the safe harbor that prohibits the IRS from retroactively assessing a worker’s classification if an employer had a reasonable basis for classifying a worker as an independent contractor. 
    • Employers who have a reasonable basis for their worker classifications will also continue to pay reduced penalties if they are found to have misclassified workers;
    • While employers who violate the IRS misclassification guidance without any reasonable basis will pay higher penalties.

These provisions raise $5.7 billion over 10 years, enough to help fund a short-term transportation bill that would protect jobs and rebuild America’s infrastructure. The deadline to pass critical highway funding is September 30, but the U.S Department of Transportation (DOT) has indicated that it will have to slow down payments to the Ohio DOT by the third week of July. If Congress doesn’t take immediate action, Ohio road and bridge projects could be delayed and thousands of construction jobs will be at risk. In order to prevent this, Congress should pass a short term patch that the Fair Playing Field Act could help pay for while working toward a long-term extension.

Joining Brown to urge for passage of this legislation was Steve Schramm, a national board member of the National Federation of Independent Business (NFIB) and the Vice President of OK Interiors, a construction contractor in Cincinnati. For more than 27 years, OK Interiors has been a union company that has advocated for the elimination of worker misclassification for the benefit of employees and employers alike.   


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