States have become much more active in recent years in targeting employers who misclassify employees as independent contractors. Here are recent laws passed on the issue, according to a report issued by attorney Steven Suflas of Ballard Spahr in New Jersey at the LEAP 2009 conference.
(House Bill 1310): Establishes penalties for willful misclassification of employees, including payment of back taxes owed and interest, and a fine of up to $5,000. Effective 06/02/2009.
(House Bill 230): The Workplace Fraud Act. Provides for civil and administrative penalties, including fines, stop-work orders, and debarment, for construction contractors that willfully misclassify employees as independent contractors. Enacted 7/31/09 and effective 90 days after enactment.
(House Bill 1795): Employee Classification Act. Provides that an individual performing services for a state contractor in the construction industry is deemed to be an employee of the contractor unless specific criteria are met. Prohibits retaliation against employees. Provides for enforcement by the Department of Labor, including imposition of civil penalties. Provides for double penalties and punitive damages in the case of willful violations. Also provides for a private right of action without exhaustion of administrative remedies. Public Act 95-0026, effective 01/01/2008.
(Senate Bill 478): Defines the term "contractor" to mean a sole proprietor, partnership, form, corporation, limited liability company, an association, or other legal entity that engages in construction and allows various state agencies to share information regarding a contractor's improper classification of an employee as an independent contractor. Enacted 05/13/2009.
(Senate Bill 909): Workplace Fraud Act of 2009. Prohibits employers from improperly classifying employees. Enacted 05/07/2009.
Creates the presumption of employee status for workers in the construction industry, subjects violators to criminal and/or civil penalties, including a private right of action for treble damages and attorney’s fees. Effective 01/01/2009 and codified at Minn. Stat. § 181.723.
(Senate Bill 92): Creates a uniform definition of employee and clarifies criteria for treating workers as independent contractors rather than employees. Enacted 07/23/2007.
The New Jersey Construction Industry Independent Contractor Act. Applies the “ABC test” under the New Jersey Unemployment Compensation Law to determine whether a worker is an independent contractor under New Jersey’s Prevailing Wage Act, Unemployment Compensation Law, Gross Income Tax Act, and State Wage and Hour Law. Improper classification of a worker by an employer can result in criminal sanctions for the employer or any officer, agent, superintendent, foreman, or employee, as well as administrative penalties and possible debarment from public contracts. Effective 07/13/2007. See N.J.S.A. 34:20-1 et seq.
(Assembly Bill 3569): Amends workers’ compensation act to provide that any employer who misrepresents employees as independent contractors or who provides false information concerning the number of its employees for the purpose of paying lower workers’ compensation premiums shall be subject to a stop-work order. Enacted 7/10/2009.
(Senate Bill 2173): Requires contractors and subcontractors with public contracts to maintain an apprenticeship training program and to classify their employees as employees and not independent contractors. Enacted 07/08/2008.
(House Bill 3122): For purposes of the unemployment compensation and workers’ compensation statutes, establishes, a definition of independent contractor and requires independent contractors, at the time of contract, to file a schedule of expenses with the Internal Revenue Service for the type of business the individual is conducting. Chapter 102, 2008, effective 06/01/2008.
(Senate Bill 5904): Amends the prevailing wage law to add a definition of independent contractor. Effective 04/10/2009.
(House Bill 1555): Requires contractors to maintain a list of direct subcontractors and their certificates of registration. Also provides than an employer who fails to maintain records shall be subject to a penalty up to $250 dollars or 200% of the quarterly tax for each offense. Chapter 432, 2009 Laws, effective 07/26/2009.
Note: In addition, related legislation was also introduced but did not pass in Delaware, Iowa, Maryland, New York, Pennsylvania and Rhode Island.