PA Construction Workplace Misclassification Act Signed Into Law

November 2010Newsletters In the Zone

On October 13, 2010, Pennsylvania Governor Ed Rendell signed House Bill 400 into law, making it Act 72 of 2010. The legislation, authored by State Representative Bryan Lentz (D-Delaware County), seeks to target employment practices on construction sites. The law penalizes employers that intentionally misclassify their workers to avoid paying taxes and workers’ compensation premiums.

The new law requires people who work in the construction industry to be employees of the party that pays their wages unless they can prove they are legitimate independent contractors. That would mean the services performed are outside the usual course of the business of that particular employer and they are customarily engaged in an independently established trade, occupation, profession or business.

While Act 72 defines a worker as an independent contractor in much the same fashion as the Internal Revenue Service, it is worth noting the prohibition against financial control of the independent contractor and his ability to offer services to the market. In particular, Act 72 states the independent contractor must have previously performed similar services while free from control or must hold himself out to others as available and able — and in fact be available and able — to perform similar services in the marketplace.

The intentional misclassification of an employee will be considered a third-degree misdemeanor. Misclassification due to negligence would be a summary offense with fines.

For more information, please contact Robert W. Gundlach, Jr. at 215.918.3636 or [email protected]