21st Century Worker Act

This bill establishes a federal framework for classifying service providers as either employees or independent contractors, replacing existing tests with a system based on mandatory categories and an elective option. It defines key terms, sets rules for initial classification and periodic review, and applies these definitions to the Fair Labor Standards Act, National Labor Relations Act, and tax code, while requiring a study on harmonizing other federal laws.

Title I, Classification of service provider payees: Defines terms like 'bona fide sole proprietor', 'business entity', 'compensation', 'employee', 'employer', 'employment by agreement', and 'formal bona fide contractor'. It creates a bifurcated classification system: mandatory independent contractors (Sec. 103) include licensed professionals, business entities, those with limited economic relationships, direct sellers, bona fide sole proprietors, and formal bona fide contractors. Mandatory employees (Sec. 104) are those with a substantial economic relationship or an employment by agreement. Elective classification service provider payees (Sec. 105) who meet neither mandatory category must elect in writing, countersigned by the payor, within 14 days; failure results in a penalty up to $100, and willful misclassification incurs a 15% penalty. Sec. 106 requires reclassification upon a major change (25% or more in hours or compensation) or other changes, with annual reviews by January 31, exempting those with under 100 hours or $10,000 in a quarter.

Title II, Application to other laws: Sec. 201 amends the Fair Labor Standards Act to adopt the bill's definitions of 'employer' and 'employee', and defines 'employ' as including to suffer or permit to work under a substantial economic relationship. Sec. 202 amends the National Labor Relations Act to use the bill's definitions for 'employer' and 'employee', and adds a definition for 'employment'. Sec. 203 amends the Internal Revenue Code to give 'employee', 'employer', and 'employment' the same meanings as in this bill, effective for tax years after enactment. Sec. 204 requires the GAO, within 2 years, to report to Congress identifying federal laws using these terms inconsistently with this bill and how harmonizing would affect them.