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DOL Sends Congress Draft Legislation to Fight Unemployment Fraud

The Department of Labor (DOL) sent Congress draft legislation Monday designed to reduce overpayments to recipients of unemployment insurance and "fight employer fraud," it said.

On the employer compliance side, the act appears to focus on reducing the number of people classified as independent contractors rather than as employees. Employers do not pay unemployment compensation taxes for independent contractors, who are not eligible to collect unemployment if they lose their sources of income. The DOL has previously announced its intention to crack down on "misclassification" of independent contractors.

According to the DOL news release, "Among several provisions, the act would permit states to use up to 5 percent of recovered unemployment compensation overpayments to deter and detect benefit overpayments. It also would allow states to use up to 5 percent of contributions collected due to employer fraud or tax evasion--including misclassification of employees--to combat these problems."

The release says the bill also would give employers an unspecified incentive to provide "timely, accurate and complete information about why their former employees no longer work for them," so states could more easily determine if an applicant for unemployment comp is qualified. It also would require employers to report the first day of earnings for new hires to a National Directory of New Hires. "This step would help to reduce overpayments due to individuals who return to work but continue to collect unemployment compensation," the DOL said.

Read the complete DOL news release and watch for the July issue of InsideCounsel to read more about state and federal initiatives to fight "misclassification" of independent contractors.

Senior Editor

Mary Swanton

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