Thursday, April 16, 2009
Employee Misclassification - What You Need to Know
The General Assembly passed the Workplace Fraud Act of 2009 (SB 909/HB 819), legislation increasing fines and penalties for employers who intentionally misclassify employees and independent contractors. The legislation impacts companies in the construction and landscaping industries, and will take effect October 1, 2009. The legislation changes several of the requirements to determine misclassification that businesses should be aware of:
- The law presumes that there is an employer-employee relationship that must be overcome by the business through the DLLR ABC Test, the most rigid standard applicable to the employee/independent contractor issue. The law allows the DLLR’s commissioner to investigate possible violations of the new law “on the commissioner’s own initiative, on receipt of a written complaint, or referral from another government agency.” Whether an employer knowingly or unknowingly misclassified an employee is determined through regulations formulated by DLLR.
- During investigation, the bill allows the commissioner to enter the employer’s place of business or work site to observe work, interview individuals, and copy records.
- The commissioner may require the employer to produce records relevant to the classification of each individual worker. If the employer does not produce these records within 15 business days, he/she is subject to a fine of $500 per day the records aren’t produced.
- If an employer is found to have knowingly misclassified an employee, the employer is required within 45 days to pay restitution to the individual and come into compliance with all applicable laws.
- The law says that the employee may bring a civil suit for economic damages against the employer. If an administrative court determines that an individual is entitled to restitution as a result of the employer’s violation of the law, the court may award the individual restitution and an additional amount up to three times the amount of any such damages, if the employer knowingly failed to properly classify the individual.
- If an individual is found to have made a groundless complaint against an employer, the individual will be subject to an administrative penalty up to $1,000.
See a copy of the bill here. Contact Allyson Black at for further information.
