House Passes Employee Misclassification Bill

The House of Delegates passed on Monday the Workplace Fraud Act of 2009 (HB 819/SB 909), legislation that would increase penalties for employers who misclassify employees as independent contractors, by a vote of 101-34. The Senate version of the bill is on the Senate floor.

The Maryland Chamber condemns any business intentionally misclassifying an employee as an independent contractor, but we have several concerns relating to the unintended consequences of the this legislation. A number of changes have been made to the bill, however the main points of the Chamber’s opposition remain intact.

One concern includes the presumption of employee status that must be overcome by the business through the DLLR ABC test. No other state or federal law related to employment, labor or civil rights law begins with such a presumption, and no other law uses a test written as narrowly as the DLLR ABC test.

“Under this system, many businesses may become entangled in costly disputes with the State even though their actions are lawful,” Maryland Chamber Employment Issues Committee Co-Chair Craig Ballew said. “Although the Chamber sought clearer safe harbors for employers who took certain steps, most of our proposals in this area were rejected. Without a clearer roadmap for compliance, the risk of compliance disputes will increase.”

Also among the Chamber’s concerns is the bill’s creation of a private right of action. An amendment limits a damages provision to economic damages, excluding punitive damages, but the Chamber believes the law would still create an incentive for plaintiffs and their attorneys to bring lawsuits directly rather than proceeding through DLLR.

“Because of these and other concerns, the Chamber remains opposed to the workplace fraud legislation. We encourage all members to contact their representatives and express opposition to the current legislation,” Ballew said. “We think that it is better to correct the defects in the current legislation before they become the law of Maryland and before Maryland employers find themselves litigating over the concerns that we have expressed to the O’Malley administration.”

The Daily Record posted an update on the bill on its Eye on Annapolis blog here. For more information on this legislation contact Vice President of Government Affairs Allyson Black at .(JavaScript must be enabled to view this email address).

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