In a continued effort to crack down on 1099 misclassification schemes, the PA legislature has passed a bill that defines the issue. You can see the bills history at http://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?syear=2009&sind=0&body=H&type=B&bn=0400 below is the most important language in that bill. MY highlights in bold.
(a) General rule.–For purposes of workers’ compensation, unemployment compensation and improper classification of employees provided herein, an individual who performs services in the construction industry for remuneration is an independent contractor only if:
(1) The individual has a written contract to perform such services.
(2) The individual is free from control or direction over performance of such services both under the contract of service and in fact.
(3) As to such services, the individual is customarily engaged in an independently established trade, occupation, profession or business.
(b) Criteria.–An individual is customarily engaged in an independently established trade, occupation, profession or business with respect to services the individual performs in the commercial or residential building construction industry only if:
(1) The individual possesses the essential tools, equipment and other assets necessary to perform the services independent of the person for whom the services are performed.
(2) The individual’s arrangement with the person for whom the services are performed is such that the individual shall realize a profit or suffer a loss as a result of performing the services.
(3) The individual performs the services through a business in which the individual has a proprietary interest.
(4) The individual maintains a business location that is separate from the location of the person for whom the services are being performed.
(5) The individual:
(i) previously performed the same or similar services for another person in accordance with paragraphs
(1), (2), (3) and (4) and while free from direction or control over performance of the services, both under the contract of service and in fact; or
(ii) holds himself out to other persons as available and able, and in fact is available and able, to perform the same or similar services in accordance with paragraphs (1), (2), (3) and (4) while free from direction or control over performance of the services.
(6) The individual maintains liability insurance during the term of this contract of at least $50,000.
(c) Factors not to be considered.–The failure to withhold Federal or State income taxes or pay unemployment compensation contributions or workers’ compensation premiums with respect to an individual’s remuneration shall not be considered in determining whether the individual is an independent contractor for purposes of the Workers’ Compensation Act or the Unemployment Compensation Law.
(d) Workers’ compensation.–
(1) An individual who is an independent contractor as determined under section 3 is not an employee for purposes of the Workers’ Compensation Act. For purposes of this section, each employment relationship shall be considered separately.
Are You in the Restaurant, Construction or Health Care Industries? If so, below is an excerpt from the most recent DOL in Action newsletter you need to read. Just like the IRS is doing with Independent Contractor misclassification Concerns, the DOL is doing with Wage and Hour, and Safety and Health concerns.
Department Launches Enforcement Efforts in Utah and Denver
The Department’s Wage and Hour Division (WHD) has launched a pair of concentrated enforcement efforts in Utah and the Denver metropolitan area to combat violations of federal minimum wage, overtime pay and child labor regulations. In Utah the initiative will focus on the restaurant industry by conducting approximately 65 establishment investigations. In addition to restaurants, the Denver initiative will include construction sites, where WHD plans to use the results to develop future strategies to increase compliance levels in order to secure safe and healthy workplaces for employees.
WHD Promotes Compliance with Fair Labor Standards Act in NY
DOL’s Wage and Hour Division is currently conducting a compliance initiative in the health care industry for all New York state counties north of New York City. This initiative from the Albany District Office aims to promote compliance with the minimum wage, overtime, recordkeeping and child labor provisions of the Fair Labor Standards Act (FLSA), and to ensure employees are protected and compensated in accordance with the law. Investigations during the last five years revealed that less than 36 percent of health care employers in that area were in compliance with the FLSA.
Note: If you are in HR we recommend you subscribe to the DOL’s email list at https://service.govdelivery.com/service/subscribe.html?code=USDOL_167