Senator Bob Casey (D-PA), chair of the Senate Subcommittee on Employment and Workplace Safety, held a hearing on payroll fraud on November 12, where he discussed legislation he has introduced called the Payroll Fraud Prevention Act.

Payroll fraud, also known as 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 said in a press release. “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.”

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 taxes, according to the press release.