CLERK of Cdurt SUPREME COURT of OHIO COUNSEL for APPELLEE, SECURITIES SERVICE NETWORK, INC

IN THE SUPREME COURT OF OHIO

Martin C. Cooper, * Ohio Supreme Court Case No. 10-0546

Appellant, On Appeal from the Lucas County Court of Appeals, Sixth Appellate District vs. Court of Appeals Securities Service Network, Inc., Case No. L-09-1127

Appellee.

MOTION FOR RECONSIDERATION OF APPELLANT MARTIN C. COOPER

C. William Bair (0015840) (COUNSEL OF RECORD) Fan Zhang (0070677) Wagoner & Steinberg, Ltd. 7445 Airport Highway Holland, Ohio 43528 Tel: (419) 865-1251 Fax: (419) 866-8798 E-mail: bairb ,wagonsterinber g. eom zhangf@wa^?onersteinberg . com

COUNSEL FOR APPELLANT, MARTIN C. COOPER

Robert N. Rapp (0010961) Matthew K. Kucharson (0082388) Eric Scott Zell (0084318) Calfee, Halter & Griswold LLP 1400 Key Bank Center R VED 800 Superior Avenue Cleveland, Ohio 44114 ;fUi^ ` 1 t^.lil0 Tel: (216) 622-8200 Fax: (216) 241-0816 CLERK OF CdURT SUPREME COURT OF OHIO COUNSEL FOR APPELLEE, SECURITIES SERVICE NETWORK, INC. Now comes Appellant Martin C. Cooper ("Mr. Cooper"), by and through counsel, and moves the Court to reconsider its decision not to accept his appeal.

Employee misclassification, which is the central issue in the dispute between Mr. Cooper and Appeellee, is a wide-spread unlawful practice by employers who have avoided their state and federal tax obligations. They do this by disguising their employees as independent contractors, which results in financial loss by the State of Ohio. Several new developments since

Mr. Cooper filed his Memorandum in Support of Jurisdiction show the great public or general interest.

Exhibit "1" is a copy of an April 11, 2010 article in PARADE, which is a national Sunday newspaper insert, titled "A Crackdown on Cheating Companies." According to this article,

"studies by the U.S. Department of Labor and the Internal Revenue Service suggest that thousands of companies may be calling workers `contractors' when they're really full-time

[employees]."... "By misclassifying workers, businesses get all the advantages of full-time employees but save millions of dollars. They also gain an edge over their competitors, deprive the government of billions in tax revenue, and hurt employees by making them ineligible for worker's compensation, unemployment insurance, medical leave, and other benefits." Id. This article references the importance of the misclassification issue at the federal level, in that

President Obama has allocated $25 million to the Department of Labor to combat employee misclassification.

Exhibit "2" is a copy of President Obama's FY 2010 federal budget summary for the U.S.

Department of Labor. The funding highlights "a joint Labor-Treasury initiative to stop the inappropriate misclassification of employees as independent contractors." This funding emphasis shows that "when employees are misclassified as independent contractors, they are

2 deprived of benefits and protections to which they are legally entitled. * * * Misclassification also has a budgetary impact, reducing receipts in Treasury and Social Security, Medicare and

Unemployment Insurance Trust Funs. * * * The 2011 Budget for the Department of Labor includes an additional $25 million to target misclassification with 100 additional enforcement personnel and competitive grants to boost States' incentives and capacity to address this problem." Id. The federal administration has taken a serious look at the employee misclassification, as should this Court.

Exhibit "3" is a copy of U.S. Senator Sherrod Brown (Ohio)'s 04/22/2010 press release showing that he has introduced a bill that would prevent workers from being misclassified as independent contractors and would provide the protection and benefits which they have eamed.

Chairman Harkin in the press release announced that "this important legislation will address this growing problem by giving workers the information they need to, protect their rights and leveling the playing field for responsible employers who play by the rules." Id. From this same press release, Ohio is estimated to lose $160 million per year in revenue from worker misclassification.

Exhibit "4" is a copy of the bill introduced by Senator Brown. This Court should join the effort of Senator Brown by accepting Mr. Cooper's appeal and to provide guidance to Courts in this state to evaluate evidence of misclassification and provide legal remedies for those misclassified

Ohio workers such as Mr. Cooper.

Finally, Exhibit "5" is a copy of the 02/18/2009 news release from Ohio's Attorney

General Richard Cordray on the collaboration of Ohio state agencies to combat the misclassification of workers. Ohio is no exception to the nation-wide growing problem of employee misclassification. This document was uncovered after the Attorney General was referred to in Senator Brown's press release.

3 Mr. Cooper's case brings this problem in sharp focus. Definitive findings by the Internal

Revenue Service concerning his misclassification by SSN were given no consideration by

FINRA arbitrators or in the opinions of the Common Pleas Court and Court of Appeals.

Guidance is needed at each of these fact-finding and review stages to address how IRS findings and analysis are to be used to evaluate worker misclassification.

The issue of employee misclassification in Mr. Cooper's appeal is of great public and general interest. A decision from this Court on the issue in appeal would have a profound impact on the use of evidence in employment law and practice in this State. Therefore, Mr. Cooper respectfully requests this Court to reconsider its decision and upon reconsideration, to accept his appeal.

Respectfully submitted,

WAGONER & STEINBEBG, LTD. Attorneys at Law

By: C. William Bair Fan Zhang Attorneys for Appellant

CERTIFICATE OF SERVICE

This is to certify that a copy of the foregoing was sent via U.S. regular mail, postage prepaid, on this ^_ day of June, 2010, to: Robert N. Rapp, Matthew K. Kucharson, and Eric Scott Zell, at Calfee, Halter & Griswold LLP, 1400 Key Bank Center, 800 Superior Avenue, Cleveland, Ohio 44114.

Fan Zhang, Attorney for Appellant

4 A Crackdown on Cheating Companies I Parade.com

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PREVIOUS , tNEXT Income Gap Grows During Recession Miners Face Growing Black-Lung Risk

._....._._. Pyrllil.2oto 1 SM1are 25 3 rebneet A Crackdown on Cheating Companies Some labor-force experts predict that 50% of jobs created in the ''.. economic recovery will go to contractors, consuflams, or other temporary employees. That's good news for employers, since these "contingent workers" cost 30% less than full-time staff. But studies by the U.S. Department of Labor and the IMernal Revenue Service '.. suggest that thousands of companies may be calling workers ° contraotors" when they're really full-time.

True independent contractors control when and how they work, rather than obeying directives from an employer. By misclassifying workers, businesses geYall theatlvantages of full-time employees but save millions of dollars. They also gain an edge '.. '.. over their cbmpetitors, deprive the government of billions in tax revenue, and hurt employees by making them iheliqible for worker's compensation, unemployment insurance, medical leave, and other benefits.

President Obama has allocated $25 million to the Department of Labor to combat employee misclassification, mostly by hiring additional investigators. Meamvhile, the IRS is expanding company audits, and states from Nebraska to Maine are anrauncing initiatives to find-and fine-c ompanies that aren't playing fair.

'.. "MisGass'rfication is a spreading epidemic," says Connecticut Attorney General Richard Blumenthal, who recently '.. proposed bigher fines and criminal sanctions for businesses in his state that misclassify workers. These companies, he adds, "not only victimize workers, who don't get the compensation they deserve, but also honest businesses who are underbid or outpriced by those that illegally cut costs." VIDEO OF THE DAY

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PREVIOUS NEXT Income Gap Grows During Recession Miners Face Growing Black-Lung Risk

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1 of3 DEPARTMENT OF LABOR

Funding Highlights:

• Supports reform of the Workforce Investment Act (WIA), which authorizes $10 billion forjob training and employment services. • Creates a Workforce Innovation Partnership with the Department of Education and establishes two innovation funds that will support and test promising approaches to job training as well as encourage States and localities to work across programmatic silos to improve services. • Starts a joint Labor-Treasury initiative to stop the inappropriate misclassification of employees as independent contractors. • Rebuilds worker protection programs to strengthen enforcement of labor standards. • Expands families' access to paid leave by creating a new fund to help States launch paid leave programs. • Boosts funding for unemployment insurance integrity efforts and proposes legislative changes that would reduce improper payments by over $4 billion and employer tax evasion by $300 million over 10 years. • Initiates a multi-agency legislative proposal to establishes automatic workplace pensions and expand access to the saver's credit, and proposes regulatory reforms to give all workers access to retirement savings opportunities, provide Americans with incentives to save throughout their working careers, and protect pension plans.

The President's Budget provides $14 billion for cess to high-quality job training throughout their the Department of Labor (DOL) to prepare work- careers. That is why the Budget calls for reform ers for good jobs that will allow them to support of the Workforce Investment Act (WIA), which their families; guarantee fair, safe and healthy supports almost 3,000 One-Stop Career Centers workplaces and secure retirements for America's nationwide and a range of other services. With workers; and fulfill its other core responsibilities. $6 billion for WIA at DOL-and an additional $4 billion in the Department of Education-the Reforming the Job Training System. Budget calls for reforms to improve WIA by: Whether they want to find a job, build basic or • Creating a Workforce Innovation Part- occupational skills, earn a postsecondary cer- nership to Streamline Service Delivery tificate, credential, or degree, or get guidance on and Invest in What Works. Over 30 Fed- charting a career path, all Americans deserve ac- eral programs provide job training and

99 100 DEPARTMENT OF LABOR

related services. Yet today, workers and get supports efforts to overhaul performance young people looking for effective training measures and incentives to discourage must navigate a maze of programs with "cream-skimming," more accurately capture little information about how well these pro- the value added by different services, and grams work. Leveraging funding from the encourage better outcomes for individuals WIA formula programs, the 2011 Budget at every level of the workforce system. Per- sets aside $261 million to establish two in- formance data should be widely available to novation funds that will support and test policymakers, program managers, and the promising approaches to training, break- participants themselves, so they can make ing down program silos, building evidence informed choices about training. about effective practices, and investing in • Focusing on High-Growth Sectors and what works. With a $101 million increase Workers Often Left Behind. The Budget in the Youth funding stream, the Budget re- makes strategic investments in competitive directs 15 percent of total Youth funding to programs to target high-growth sectors and a Youth Innovation Fund to pilot innovative serve populations often left behind, includ- models for delivering summer and year- ing $85 million for green job training and round work experiences and comprehensive $40 million for transitional jobs programs. services to disconnected youth. The Work- The Budget also supports an initiative to force Innovation Fund pulls 5 percent from reform and improve Job Corps, by setting the Adult and Dislocated Worker streams high standards for Job Corps centers and to support and test "learn and earn" strat- taking quick and decisive action to address egies like apprenticeships and on-the-job problems. training; promote regional and sectoral col- laborations; and support other innovations. Protecting Benefits for Employees by En- In addition, DOL will work closely with the suring Proper Classification. When employ- Department of Education to administer the ees are misclassified as independent contractors, innovation grants, and use them as a mech- they are deprived of benefits and protections to anism for encouraging States and localities which they are legally entitled. For example, in- to work across programs to improve service dependent contractors do not receive overtime delivery and participant outcomes. and are ineligible to receive unemployment ben- • Meeting the Needs of Regional Econo- efits. Misclassification also has a budgetary im- mies and Employers. Labor markets are pact, reducing receipts in Treasury and the Social typically regional, yet the workforce system Security, Medicare and Unemployment Insurance is designed around State and local bound- Trust Funds. As part of the 2011 Budget, the aries. The system also does not do a good Departments of Labor and Treasury are pursu- enough job matching training with employ- ing a joint proposal that eliminates incentives in er demand. Through new innovation funds law for employers to misclassify their employees; and WIA reauthorization, the Administra- enhances the ability of both agencies to penalize tion will facilitate regional collaboration and employers who misclassify; and restores protec- close linkages with employers so that train- tions to employees who have been denied them ing leads to good jobs. because of their improper classification. This proposal would increase Treasury receipts by more • Establishing a Transparent Account- than $7 billion over 10 years. The 2011 Budget ability System that Encourages Suc- for DOL includes an additional $25 million to tar- cess. The current accountability system get misclassification with 100 additional enforce- dissuades States and localities from serving ment personnel and competitive grants to boost the populations that most need their assis- States' incentives and capacity to address this tance, like low-skilled adults, individuals problem. with disabilities, and others needing more specialized and intensive services. The Bud- THE BUDGET FOR FISCAL YEAR 2011 101

Rebuilding Worker Protection Programs. ling family reasons, and those seeking to retool The Budget includes a $67 million (4 percent) for another career. increase for the Department's worker protection agencies to ensure they have the resources At the same time, the Administration believes to meet their responsibilities to protect the UI benefits should go to the right workers in the health, safety, wages and working conditions, right amounts. When States have to finance and retirement security of the nation's workforce. high levels of UI improper payments, employers The 2011 Budget builds on the 2010 Budget pol- face higher taxes and workers may see cuts in icy of returning worker protection programs to their benefit levels. Despite the efforts of States the 2001 staffing levels, after years of decline. In to reduce improper payments, over $11.4 billion addition, the Budget provides additional resourc- in UI benefits were erroneously paid in 2009- es for the regulatory and enforcement activities an overpayment rate of almost 10 percent. The of these agencies. Administration will tackle this problem by boost- ing funding for UI integrity efforts and proposing Helping States Provide Paid Family Leave legislative changes that together would reduce to Workers. Too many families must make the improper payments by over $4 billion and em- painful choice between the care of their fami- ployer tax evasion by $300 million over 10 years. lies and a paycheck they desperately need. The Family and Medical Leave Act allows workers to Improving Retirement Security. After a take job-protected time off unpaid, but millions lifetime of employment, American workers de- of families cannot afford to use unpaid leave. A serve to know that their efforts have resulted in handful of States have enacted policies to offer a secure retirement. The Administration is com- paid family leave, but more States should have mitted to giving Americans more and better choic- the chance. The Budget establishes a $50 million es to save for retirement while also strengthening State Paid Leave Fund within DOL that will pro- the existing private pension system. The Budget vide competitive grants to help States that choose proposes a multi-agency effort to expand and im- to launch paid-leave programs cover their start- prove employment-based retirement security by: up costs. The Budget also provides resources to • Establishing Automatic Workplace allow DOL to explore ways to improve the collec- Pensions. Currently, 78 million working tion of data related to intersection of work and Americans-roughly half the workforce- family responsibilities. lack employer-based retirement plans. The 2011 Budget proposes a system of automatic Strengthening Access to, and Accuracy workplace pensions that will expand access of, Unemployment Benefits. Working with the to tens of millions of workers who currently Congress, the Administration has already extend- lack pensions. Under the proposal, employed and expanded unemployment insurance (UI) ers who do not currently offer a retirement benefits to historic levels and offered powerful in- plan will be required to enroll their employ- centives for States to make permanent changes ees in a direct-deposit IRA account that is to modernize their UI programs. In response to compatible with existing direct-deposit pay- these incentives, 26 States have changed their roll systems. Employees may opt-out if they laws so that up to 20 weeks of additional bene- choose. The smallest firms would be exempt. fits are available to workers who have exhausted their regular and Emergency Unemployment • Doubling the Small Employer Pension Compensation benefits; and 32 States now offer Plan Startup Credit. Under current law, benefits to recent entrants to the workforce who small employers are eligible for a tax cred- lose their jobs. States have also granted benefits it equal to 50 percent (up to a maximum of to part-time workers, those who must leave their $500 a year for three years) of the start-up jobs because of domestic violence or other compel- expenses of establishing or administering a new retirement plan. To encourage small 102 DEPARTMENT OF LABOR

employers to offer pensions to their work- number of initiatives to improve the trans- ers in connection with the automatic IRA parency and adequacy of 401(k) retirement proposal, the Budget will increase the maxi- savings. Specifically, DOL will undertake mum credit from $500 a year to $1,000 per regulatory efforts to reduce barriers to an- year. nuitization of 401(k) plan assets; increase the transparency of pension fees; improve • Reforming and Expanding the Saver's transparency of target date and other de- Credit. The Budget proposes to expand fault retirement investments; and reduce retirement savings incentives for working conflicts of interest between pension advis- families by modifying the existing Saver's ers and fiduciaries. Credit to provide a 50 percent match on the retirement savings of families that earn less • Expanding Opportunities for Auto- than $85,000 (up to $1,000 of savings would matic Enrollment in 401(K) and Other be matched). The credit would be fully re- Retirement Savings Plans. Automatic fundable to create savings incentives fair to enrollment typically boosts participation in all workers. Studies indicate that automatic 401(k) retirement plans from about 70 per- enrollment combined with a savings match cent to more than 90 percent, and it is par- significantly increases the savings participa- ticularly effective in increasing the partici- tion rate for low and middle income workers. pation of low-income and minority workers. This proposal is expected to increase signifi- But while nearly half of larger companies cantly both the number of Americans who with 401(k) plans have adopted automatic save for retirement and the overall amount enrollment, fewer medium-sized or small of amount of retirement wealth they accu- businesses have done so. The Administra- mulate. tion will streamline the process for 401(k) plans to adopt automatic enrollment; make • Improving the Defined-Contribution it easier to increase saving over time; and al- Savings System. A majority of American low automatic enrollment in SIMPLE-IRAs. workers rely on 401(k)-style plans to finance their retirements. The Budget proposes a

Department of Labor (In millions of dollars) Estimate Actual 2009 2010 2011

Spending Discretionary Budget Authority: Training and Employment Service ...... 3,626 3,829 3,925 Unemployment Insurance Administration ...... 3,511 3,990 3,581 Employment Service/One-Stop Career Centers ...... 793 788 788 Office of Job Corps ...... 1,684 1,708 1,707 Community Service Employment for Older Americans ...... 572 825 600 Bureau of Labor Statistics ...... 597 611 645 Occupational Safety and Health Administration ...... 513 559 573 Mine Safety and Health Administration ...... 347 357 361 Wage and Hour Division 1 ...... 193 224 244 Office of Federal Contract Compliance Programs ...... 82 103 113 THE BUDGET FOR FISCAL YEAR 2011 103

Department of Labor-Continued (In millions of dollars) Estimate Actual 2009 2010 2011 Office of Labor-Management Standards ...... 45 41 45 Office of Workers' Compensation Programs ...... 103 108 127 Employee Benefits Security Administration ...... 143 155 162 Veterans Employment and Training ...... 239 256 262 Departmental Management: 314 356 429 Bureau of International LaborAffairs (non-add) ...... 86 93 115 Solicitor of Labor (non-add) ...... 101 117 123 Foreign Labor Certification ...... 68 68 66 Office of Disability Employment Policy ...... 27 39 39 State Paid Leave Fund ...... - - 50 All other ...... 36 241 251 Total, Discretionary budget authority ...... 12,893 14,266 13,967

Memorandum: Budget authority from American Recovery and Reinvestment Act .... 4,805 - -

Total, Discretionary outlays ...... 12,125 14,674 13,936 Memorandum: Outlays from American Recovery and Reinvestment Act ...... 882 2,941 565

Mandatory Outlays: Unemployment Insurance Benefits Existing law ...... 93,783 126,787 82,385 Legislative proposal ...... - 31,000 17,912 Trade Adjustment Assistance Existing law ...... 416 810 1,497 Legislative proposal ...... - - 145 Pension Benefit Guaranty Corporation ...... 194 -86 -1,073 Black Lung Benefits Program ...... 3,060 524 512 Federal Employees' Compensation Act 2 Existing law ...... 1,246 184 180 Legislative proposal ...... - - -10 Energy Employees Occupational Illness Compensation Program Act ...... 1,168 1,080 960 All other ...... -2,146 -2,534 271 102,779 Total, Mandatory outlays ...... 97,721 157,765

Memorandum: Outlays from American Recovery and Reinvestment Act ...... 27,434 33,898 1,533

Total, Outlays ...... 109,846 172,439 116,715 In the 2011 Budget, funding previousty requested torihe component agencies and offices under the heading "Employment Standards Administrahon Salades and Expenses" is requested separately for the Office of Workers' Compensation Progmms, Wage and Hour Division, Office of Federal Coniract Compliance Programs, and Office of Labor-Management Standards. 2 2009 outlays are lower due to delayed reimbursements from the Postal Service. Senator Sherrod Brown I Senator for Ohio: Press Releases - Sen. Brow... http://brown.senate.gov/newsrooni/press_releases/release/?id=814547...

Senator Sherrod Brown

Press Releases, Press Release Sen. Brown Joins Colleague in Announcing Bill to Ensure that Workers Receive Protection and Benefits They Have Earned

Brown Introduces Legislation that Would Reduce the Number of Worker Misclassification Violations and Ensure Fairness to Workers and Businesses

April 22, 2010 WASHINGTON D.C. - U.S. Sen. Sherrod Brown (D-OH) today introduced tegistation that would prevent workers from being misclassified as independent contractors and would provide for the protection and benefits which they have earned. The Employee Misclassification Prevention Act woutd ensure access to safeguards like fair tabor standards, health and safety protections, andunemployment and workers' compensation benefits. U.S. Rep. Lynn Wootsey (D-CA) introduced companion legislation in the house.

"For too long, workers have been denied vital worker safeguards - like fair tabor standards, health and safety protections, and UI or workers' compensation benefits," Brown said. "With stilt fragile economic recovery with significant job loss - workers are too often taken advantage of and tose out on the benefits they rightfully eamed. Meanwhile, employers who do right by their emptoyees are placed at a disadvantage when competitors are cutting corners." Tens of thousands of employers misclassify their employees as independent contractors, and as a result, these workers are not eligible for benefits such as minimum wage and overtime, unemployment insurance, and workers compensation. Misclassified workers are also not protected by anti-discrimination and health and safety laws. "Misclassification cheats workers out of important tabor protections, like the right to overtime pay and workers' compensation, and robs federal and state governments of desperately needed tax revenues," Chairman Harkin said. "This important legislation will address this growing problem by giving workers the information they need to protect their rights and leveling the ptaying field for responsible employers who play by the rutes." Misclassification also undermines the budgets of state and tocal governments - resulting in increased costs for taxpayers or reduced services. According to a study by Ohio Attorney General Rich Cordray, Ohio loses at least $160 million a year to each year from worker misctassification. This does not account for further losses to local government and school budgets. The Obama Administration estimates that better record-keeping could raise $7 billion over the next ten years.

EMPA would reduce the number of misclassification violations by:

• Ensuring that employers keep records that reflect the accurate status of each worker as an emptoyee or non-employee and clarifying that employers viotate the Fair Labor Standards Act when they misclassify workers. • Increasing penalties on employers who misctassify their emptoyees and are found to have violated employees overtime or minimum wage rights. • Requinng employers to notify workers of their classification as an employee or non-employee • Creating an "employee rights web site" to inform workers about their federat and state wage and hour rights. • Providing protections to workers who are discriminated against because they have sought to be accurately classified.

EMPA would improve federal and state efforts to detect and stop misclassification by: • Mandating that states conduct audits to identify employers who misctassify workers and by requiring that DOL monitor states' efforts to identify misclassification. • Directing states to strengthen their own penalties for worker misclassification. • Permitting DOL and IRS to refer incidents of misctassification to one another. • Directing DOL to perform targeted audits focusing on emptoyers in industries that frequently misctassify emptoyees.

###

Press Contacts: 202-224-3978

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I of2 Senator Sherrod Brown I Senator for Ohio: Press Releases - Sen. Brow... http://brown.senate.gov/newsroom/press_releases/release/?id=814547...

06/16/lOWith Extenders Bih AwaitingSenate Vote, Sen. Brown Discusses Criticat Tax Credit 'orSmall Businesses Across Ohio..

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2 of2 6/17/2010 9:36 AM Bill Text - 111th Congress (2009-2010) - THOMAS (Library of Congress) http://thomas.loc.gov/cgi-bin/query/C?c111:./temp/-c111 WMUCj

S 3254 IS

111th CONGRESS

2d Session

S. 3254

h'o amend the Fair Labor Standards Act of 1938 to require persons to keep records of non-employees who perform labor or services for remuneration and to provide a special penalty for persons who misclassify employees as non-employees, and for other purposes. ''...

IN THE SENATE OF THE UNITED STATES

April 22, 2010

:Mr. BROWN of Ohio (for himself, Mr. HARKIN, Mr. DURBIN, Mrs. MURRAY, Mr. CASEY, and Mr. MERKLEY) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions

A BILL

To amend the Fair Labor Standards Act of 1938 to require persons to keep records of non-employees who perform labor or services for remuneration and to provide a special penalty for persons who misclassify employees as non-employees, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, ......

SECTION 1. SHORT TITLE.

''..... This Act may be cited as the ' Employee Misclassification Prevention Act'.

SEC. 2. CLASSIFICATION OF EMPLOYEES AND NON-EMPLOYEES.

(a) Recordkeeping and Notice Requirements- Section 11(c) of the Fair Labor Standards Act of 1938 (29 U.S.C. 211(c)) is amended--

(1) by striking ' (c) Every employer subject to any provision of this Act or of any order issued under this Act' and inserting the following:

' (c) Recordkeeping and Notice Requirements-

'(1) IN GENERAL- Every person subject to any provision of this Act or of any order issued under this Act';

(2) by striking 'of the persons employed by him' and inserting the following: ' of--

'(A) each individual employed by such person';

(3) by striking 'employment maintained by him, and shall' and inserting the following: 'employment;

'(B) subject to paragraph (2), each individual-- '(i) who is not an employee within the meaning given the term in section 3(e) (referred to in this subsection as a 'non-employee'); '(ii) whom the person has engaged, in the course of the person's trade or business, for the performance of labor or services; and '(iii)(I) with respect to whom the person is required to file an information return under section 6041A(a) of the Internal Revenue Code of 1986; or

' (II) who is providing labor or services to the person through an entity that is a trust, estate, partnership, association, company, or corporation (as such terms are used in section 7701(a)(1) of the Internal Revenue Code of 1986) if--

'(aa) such individual has an ownership interest in the entity; ' (bb) creation or maintenance of such entity is a condition for the provision of such labor or services to the person; and ' (cc) the person would be required to file an information return for the entity und

I of4 Bill Text - 111th Congress (2009-2010) - THOMAS (Library of Congress) ht(p://(homas.loc.gov/cgi-bin/query/C?c111:./temp/-c111VVM1.iCj

FLFDBpGK '(C) the remuneration and hours relating to the performance of labor or services by each individual described in subparagraph (B); and

'(D) the notices required under paragraph (5), and shall'; and

(4) by adding at the end the following:

'(2) RECORDKEEPING LIMITATION- A person otherwise subject to the requirements of paragraph (1) shall have nol responsibility for making, keeping, or preserving records, including the records described in such paragraph and paragraph (4), concerning the employees of any individual described in paragraph (1)(B) or the non-employees with whom such individual has engaged for the performance of labor or services for such person, unless such records are provided during the course of the trade or business to the person.

'(3) PRESUMPTION-

'(A) IN GENERAL- For purposes of this Act and the regulations or orders issued under this Act, an individual who is employed, or who is remunerated for the performance of labor or services, by a person, shall be presumed to be an employee of the person if--

'(i) the person has not made, kept, and preserved records in accordance with subparagraphs (B) and (C) of paragraph (1) regarding the individual; or

'(ii) the person has not provided the individual with the notice required under paragraph (5). ''....

'(B) REBUTTAL- The presumption under subparagraph (A) shall be rebutted only through the presentation of ''.... clear and convincing evidence that an individual described in such subparagraph is not an employee (within the meaning of section 3(e)) of the person.

'(4) ACCURATE CLASSIFICATION- An accurate classification of the status of each individual described in paragraph (1) as either an employee (within the meaning of section 3(e)) of the person maintaining the records or a non-employee of such person shall be included within the records under this subsection.

'(5) NOTICE-

'(A) IN GENERAL- Every person subject to any provision of this Act or of any order issued under this Act shall ''.. provide the notice described in subparagraph (C) to each employee of the person and each individual classified''... by the person as a non-employee under paragraph (1)(B). ''....

'(B) TIMING OF NOTICE- '....

'(i) IN GENERAL- Such notice shall be provided, at a minimum, not later than 6 months after the date of enactment of the Employee Misclassification. Prevention Act, and thereafter--

'(I) for new employees, upon employment; and

'(II) for new non-employees who are classified under paragraph (1)(B), upon commencement of ''... the labor or services described in such paragraph.

'(ii) CHANGE IN STATUS- Each person required to provide notice under subparagraph (A) to an individuaf shall also provide such notice to such individual upon changing such individual's status as an employee or!. non-employee under paragraph (1).

'(C) CONTENTS OF NOTICE- The notice required under this paragraph shall be in writing and shall--

'(i) inform the individual of the individual's classification, by the person submitting the notice, as an employee or a non-employee under paragraph (1); '....

'(ii) include a statement directing such individual to a Department of Labor Web site established for the purpose of providing further information about the rights of employees under the law; '(iii) include the address and telephone number for the applicable local office of the United States Department of Labor;

'(iv) include for each individual classified as a non-employee under paragraph (1)(B) by the person submitting the notice, the following statement: 'Your rights to wage, hour, and other labor protections depend upon your proper classification as an employee or non-employee. If you have any questions or concerns about how you have been classified or suspect that you may have been misclassified, contact the U.S. Department of Labor.'; and

'(v) include such additional information as the Secretary shall prescribe by regulation.'.

2 of4 6/17/2010 10:21 AM Bill Text - 111th Congress (2009-2010) - THOMAS (Library of Congress) http://thomas.loc.gov/cgi-bin/query/C?c111:./temp/-c111 WMIJCj

(b) Special Prohibited Acts- Section 15(a) of the Fair Labor Standards Act of 1938 (29 U.S.C. 215(a)) is amended-- (1) by striking paragraph (3) and inserting the following:

'(3) to discharge or in any other manner discriminate against any individual (including an employee) because such individual has--

'(A) opposed any practice, or filed a petition or complaint or instituted or caused to be instituted any proceeding--

'(i) under or related to this Act (including concerning an individual's status as an employee or non-employee for purposes of this Act); or '!.

'(ii) concerning an individual's status as an employee or non-employee for employment tax purposes ''.. within the meaning of subtitle C of the Internal Revenue Code of 1986;

'(B) testified or is about to testify in any proceeding described in subparagraph (A); or

'(C) served, or is about to serve, on an industry committee;';

(2) in paragraph (5), by striking the period at the end and inserting '; and'; and

(3) by adding at the end the following: '(6) to fail to accurately classify an individual as an employee.'.

(c) Special Penalty for Certain Misclassification, Recordkeeping, and Notice Violations- Section 16 of the Fair Labor Standards Act of 1938 (29 U.S.C. 216) is amended-- (1) in subsection (b)--

(A) in the sixth sentence, by striking 'any employee' each place the term occurs and inserting 'any employee or individual';

(B) in the fourth sentence, by striking 'employee' and inserting 'employee or individual';

(i) by striking 'either of the preceding sentences' and inserting 'any of the preceding sentences';

(ii) by striking 'one or more employees' and inserting 'one or more employees or individuals'; and

(iii) by striking 'other employees' and inserting 'other employees or individuals, respectively,'; and ''.

(D) by inserting after the first sentence the following: 'Such liquidated damages are doubled (subject to section 11 of the Portal-to-Portal Pay Act of 1947 (29 U.S.C. 260)) where, in addition to violating the provisions of section 6 or 7, the employer has violated the provisions of section 15(a)(6) with respect to such employee or employees.'; and (2) in subsection (e), by striking paragraph (2) and inserting the following:

'(2) Any person who violates section 6, 7, 11(c), or 15(a)(6) shall be subject to a civil penalty, for each employee or other individual who was the subject of such a violation, in an amount-- ''....

' (A) not to exceed $1,100; or ''....

'(B) in the case of a person who has repeatedly or willfully committed such violation, not to exceed $5,000.'.

(d) Employee(1) Rights Web Site- ''....

IN GENERAL- Not later than 180 days after the date of enactment of this Act, the Secretary of Labor shall '.... establish, for purposes of section 11(c)(5)(C)(ii) of the Fair Labor Standards Act of 1938 (as added by this Act), a i single web page on the Department of Labor Web site that summarizes in plain language the rights of employees as''..... described in the amendments made by subsection (a) and other information considered appropriate by the ''..... Secretary, including appropriate links to additional information on the Department of Labor Web site or other ''..... Federal agency Web sites. In addition, such web page-- '.. (A) shall include a statement explaining that employees may have additional or greater rights under State or ''..... local laws and how employees may obtain additional information about their rights under State or local laws; ''...

(B) shall be made available in English and any other languages that the Secretary determines to be prevalent ''..... among individuals likely to access the web page; and

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(2) COORDINATION WITH OTHER FEDERAL WEB SITES- The Secretary shall coordinate with other relevant Federal ''. agencies in order to provide information similar to the information described in paragraph (1) (or a link to the Department of Labor web page required by this subsection) on the Web sites of such other agencies. ....

SEC. 3. MISCLASSIFICATION OF EMPLOYEES FOR UNEMPLOYMENT COMPENSATION PURPOSES.

(a) In General- Section 303(a) of the Social Security Act (42 U.S.C. 503(a)) is amended--

(1) in paragraph (10), by striking the period and inserting '; and'; and ''.....

(2) by adding after paragraph (10) the following: ''.... '(11)(A) Such auditing and investigative procedures as may be necessary to identify employers that have not registered under the State law or that are paying unreported wages, where these actions or omissions by the ,.. employers have the effect of excluding employees from unemployment compensation coverage; and

'(B) The making of quarterly reports to the Secretary of Labor (in such form as the Secretary of Labor may require) describing the results of the procedures under subparagraph (A); and '(12) The establishment of administrative penalties for misclassifying employees, or paying unreported wages to ''...... employees without proper recordkeeping, for unemployment compensation purposes.'. ''.....

(b) Review of Auditing Programs- The Secretary of Labor shall include, in the Department of Labor's system for ''..... measuring States' performance in conducting unemployment compensation tax audits, a specific measure of their effectiveness in identifying the underreporting of wages and the underpayment of unemployment compensation contributions (including their effectiveness in identifying instances of such underreporting or underpayments despite the absence of cancelled checks, original time sheets, or other similar documentation).

(c) Effective Date- (1) IN GENERAL- Except as provided in paragraph (2), the amendments made by subsection (a) shall take effect 12' months after the date of the enactment of this Act. (2) EXCEPTION- If the Secretary of Labor Flnds that legislation is necessary in order for the unemployment compensation law of a State to comply with the amendments made by subsection (a), such amendments shall not apply(A) with respect to such law until the later of-- ''..... the day after the close of the first regular session of the legislature of such State which begins after the date of the enactment of this Act; or

(B) 12 months after the date of the enactment of this Act. ''..... (d) Definition of State- For purposes of this section, the term ' State' has the meaning given such term by section 3306(j) of the Internal Revenue Code of 1986.

SEC. 4. DEPARTMENT OF LABOR COORDINATION, REFERRAL, AND REGULATIONS.

(a) Coordination and Referral- Notwithstanding any other provision of law, any office, administration, or division of the ''...... Department of Labor that, while in the performance of its official duties, obtains information regarding the ''... misclassification by a person subject to the provisions of the Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq.) or^...... any order issued under such Act of any individual regarding whether such individual is an employee or a non-employee '.... contracted for the performance of labor or services for purposes of section 6 or 7 of such Act (29 U.S.C. 206, 207) or in ''.... records required under section 11(c) of such Act (29 U.S.C. 211(c)), shall report such information to the Wage and Hour Division of the Department. The Wage and Hour Division may report such information to the Internal Revenue Service asl the Division considers appropriate. (b) Regulations- The Secretary of Labor shall promulgate regulations to carry out this Act and the amendments made by''... this Act.

SEC. S. TARGETED AUDITS.

The audits of employers subject to the Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq.) that are conducted by ''.... the Wage and Hour Division of the Department of Labor shall include certain industries with frequent incidence of misclassifying employees as non-employees, as determined by the Secretary of Labor.

END

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4 of4 6/17/2010 10:21 AM Ohio to Crack Down on Entployee Misclassification http://www.ohioattorneygeneral.govBriefing-Room/News-Releases/F...

Ohio Attorney General Richard Cordray

Briefing Room > News Releases > Februarv 2009 > Ohio to Crack Down on Employee Misclassification PREVIOUS RELEASES NEWS RELEASES 0 June 2010 MaV 201 Ohio to Ctack Down on Employee Misclassification Apri12010 2/18/2009 March 2010 Fe ryary2010 (COLUMBUS, Ohio) -Attorney General Richard Cordray today announced the unprecedented collaboration of state agencies to combat the misclassification of [email protected] workers. Employee misclassification is part of an "underground economy" in which an December2009 employer improperly classifies individuals as independent contractors or pays them November 2009 "off the books" to avoid taxes and other required payments. As a result, the state and Qctober2009 local governments lose hundreds of millions of dollars annually. Sep(ember2009 August2o0s "This is a problem that affects everyone, but most people don't know about it," said Ju009 Cordray. "By cutting corners, some employers are in effect stealing from the rest of June 2009 us. Through unemployment compensation, Bureau of Workers' Compensation premiums, and state income tax revenues, state and local governments in Ohio are Mav 2009 losing hundreds of millions of dollars each year. This is inexcusable in any economic Apri12009 environment, but absolutely unforgivable today. It is time to level the playing field for Marc1i2009 those businesses that play by the rules." Februarv 2009 January 2009 In an unprecedented move to prevent misclassification, the Ohio Department of Job All Newe Releases and Family Services, Ohio Department of Taxation, and Ohio Bureau of Workers' Compensation joined forces in an agreement to release and exchange information. The agreement is believed to be the first of its kind in the state and emphasizes the Media Room commitment of Ohio leaders to hold accountable those abusing the system. More information for members of the media. A culmination of six months of work by a task force led by Cordray, the agreement opens the door for sharing relevant information, coordinating enforcement efforts, leveling the playing field for law-abiding businesses, and protecting state and local government from being defrauded of lawful revenues. This task force will continue to assess the problem, lay the groundwork for more vigorous enforcement efforts, and make recommendations to policymakers and elected leaders as they arise.

A report compiled by the Attorney General's Office estimates that the extent of annual costs from worker misclassification may be $100 million for unemployment compensation, more than $510 million in BWC premiums and almost $180 million in forgone state income tax revenues. Additionally, misclassification is estimated to have cost Ohio cities and villages more than $100 million in local income tax revenues in 2006, and cost school districts $7.8 million in 2008.

Click to view the following:

Letters from Ohio Attornev General Richard Cordray

Report of the Ohio Attornev General on the Economic Impact of Misclassification Workers for State and Local Governments in Ohio

Agreement for Misclassified Workers

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