Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
On October 13, 2010, Governor Rendell signed into law the Construction Workplace Misclassification Act. The Act curtails the circumstances under which a construction worker may be classified as an independent contractor for purposes of workers’ compensation and unemployment insurance.
Under the Act, to be classified as an independent contractor, a construction worker must meet three criteria: (1) have a written contract to perform services; (2) be free from the hiring party’s control or direction when performing such services; and (3) be customarily engaged in an independently established trade, occupation, profession or business.
For the hired party to be “customarily engaged in an independently established trade, occupation, profession or business,” the hired party must: (1) possess the essential tools for the job, independent of the person for whom the services are performed; (2) realize a profit or loss as a result of performing the services; (3) perform the services through a business he owns, at least in part; (4) maintain an independent business location; (5) either perform similar services for another hiring party while meeting the first four requirements or credibly hold himself out as able to perform similar services; and (6) maintain individual liability insurance during the term of the contract of at least $50,000. Each criterion must be specifically met in order to classify a worker as an independent contractor.
Construction industry employers who misclassify workers and fail to provide coverage or make required payments or contributions under the Workers’ Compensation Act or the Unemployment Compensation Law may be penalized with fines or incarceration. Officers and agents of those employers, and those who intentionally contract with such an employer knowing that it intends to misclassify workers in violation of the Act, are subject to the same penalties. The Act further prohibits retaliation against whistleblowers.
The law goes into effect on February 11, 2011. Before that time companies engaged in construction should carefully review their arrangements with independent contractors to ensure they comply with the requirements of the law.
This entry was written by Thomas Benjamin Huggett and Matthew J. Hank.
Photo credit: BartCo