A few months ago we focused on how the federal government has stepped up its enforcement activities against the misclassification of workers. This month, we are expanding on the Pennsylvania Construction Workplace Misclassification Act (the “Act”) that was enacted regarding the classification of independent contractors in the construction industry.
The Act sets forth criteria to be used to determine whether an individual working in the construction industry is an independent contractor or an employee. That Act states that an individual working in the construction industry is only an independent contractor if the person: 1) has a written contract to perform such services; 2) is free from control or direction over the performance of those services; and 3) is customarily engaged in an independently established trade, occupation, profession or business.
The Act provides specific factors that must be satisfied to establish that the third criterion is satisfied, including: 1) the individual possesses the essential tools, equipment and other assets necessary to perform the services independently of the person for whom the services are being performed; 2) the individual’s arrangement is such that the individual could gain a profit or suffer a loss as a result of performing the services; 3) the individual performs the service through a business in which he or she has a proprietary interest; 4) the individual maintains a business location separate from that of the person for whom services are being performed; 5) the individual previously performed these services for another person while free from direction or control, or is available to work for others who will not provide direction or control; and 6) the person maintains liability insurance of at least $50,000 during the term of the contract.
If a violation of the Act is found to exist, the employer, its officers, and its agents may be held liable for monetary penalties, and, in extreme circumstances, may be subject to criminal penalties. Due to the increased focus on the issue of the classification of independent contractors, it is wise for all businesses that utilize independent contractors to review their use of independent contractors and ensure that their workers are correctly classified.
The Association’s Legal Services Division can assist you with a variety of employment law issues. Please contact me at 814/833-3200, 800/815-2660 or tlamary@mbausa.org for more information.
