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Maryland Gov. Martin O'Malley has signed into law a crackdown on the misclassification
of employees as independent contractors that includes a tough new set of
enforcement tools for state labor officials and allows fines of up to
$20,000 per worker for perennial offenders.
O'Malley signed Senate Bill 909 into law last Thursday. He predicted The
Workplace Fraud Act, one of his key initiatives for the 2009 legislative
session, will save taxpayers nearly $100 million a year in taxes that now
go unpaid because workers are misclassified or simply paid "off the
books."
Officials at the Maryland Department of Labor, Licensing
and Regulation (DLLR) said they are drafting a series of complex
regulations to implement the bill and are preparing to hire five or six
investigators as part of an enforcement effort that will get $258,952 in
special state funding in fiscal year 2010.
The provision creating the investigative team expands its budget to
$393,000 by 2014, based on an anticipated windfall in unemployment and
other taxes.
The law imposes fines of $1,000 per worker for any employer who
unintentionally misclassifies a worker and $5,000 per employee for
knowing violations.
A third finding of guilt by DLLR allows fines of up to $20,000 per
worker. DLLR investigators are empowered to stage unannounced raids on Maryland
workplaces to check for misclassification and will have subpoena power.
DLLR may also award misclassified workers damages. Workers who do not
receive damage awards for the agency are allowed to sue their employees
for damages in civil court.
Amid misclassification initiatives by a number of states, Maryland currently
imposes no penalties against employers who misclassify workers to avoid
paying unemployment taxes or workers' compensation premiums.
SB 909 sets up three classes of violations covering wage-and-hour laws,
unemployment laws and workers' compensation laws.
The bill singles out construction and landscaping companies for
enforcement of the wage-and-hour laws based on misclassification. But it
covers all employers who misclassify workers or pay them under the table
to avoid paying unemployment and workers' compensation.
The law also supplies an expanded definition of independent contractors
under a new label – "exempt persons" – and defines
them as anyone who:
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Performs services in a personal capacity
and employs no one else except his or her spouse, child
or parent.
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Performs services free from the direction
and control of the company with which they contract. The contracting
employee does have the right to "specify the desired result."
§
Furnishes tools and equipment needed for
the job.
§
Operates a business that "is
considered inseparable from the individual for the purpose of taxes, profits and liabilities."
The law takes effect Oct. 1.
Source: WorkCompCentral
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