THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY SABATINA, BARBIN, BRADFORD, BRENNAN, BRIGGS, BROWNLEE, BURNS, BUXTON, CALTAGIRONE, CARROLL, COHEN, D. COSTA, P. COSTA, CRUZ, CURRY, DEASY, DeLUCA, DePASQUALE, DERMODY, DONATUCCI, FABRIZIO, FARRY, FRANKEL, GALLOWAY, GEORGE, GERBER, GERGELY, GIBBONS, GOODMAN, HALUSKA, HANNA, HARKINS, JOSEPHS, W. KELLER, KORTZ, KOTIK, MAHONEY, MANN, MATZIE, McGEEHAN, MUNDY, MURT, NEUMAN, M. O'BRIEN, PASHINSKI, PAYTON, RAVENSTAHL, READSHAW, SANTARSIERO, SANTONI, K. SMITH, M. SMITH, STURLA, TAYLOR, WATERS, WHEATLEY, WHITE, YOUNGBLOOD, NEILSON AND SCHMOTZER, JULY 2, 2012

REFERRED TO COMMITTEE ON LABOR AND INDUSTRY, JULY 2, 2012  

AN ACT

Providing for the criteria for independent contractors in the

commercial carrier industry and for the powers and duties of

the Department of Labor and Industry and the Secretary of

Labor and Industry; and imposing penalties.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Short title.

This act shall be known and may be cited as the Commercial

Carrier Industry Workplace Misclassification Act.

Section 2.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Commercial carrier."  Any employer in this Commonwealth

holding out, offering or undertaking, directly or indirectly,

service for compensation to the public for the transportation of

passengers or property, or both, or any class of passengers or

property by, through, over, above or under land, water or air.

"Department."  The Department of Labor and Industry of the

Commonwealth.

"Employee."  Either of the following:

(1)  In relation to workers' compensation, the term shall

have the meaning given to it in section 104 of the act of

June 2, 1915 (P.L.736, No.338), known as the Workers'

Compensation Act.

(2)  In relation to unemployment compensation, the term

shall have the meaning given to it in section 4(i) of the act

of December 5, 1936 (2nd Sp.Sess., 1937 P.L.2897, No.1),

known as the Unemployment Compensation Law.

"Employer."  Either of the following:

(1)  In relation to workers' compensation, the term shall

have the meaning given to it in section 103 of the act of

June 2, 1915 (P.L.736, No.338), known as the Workers'

Compensation Act.

(2)  In relation to unemployment compensation, the term

shall have the meaning given to it in section 4(j) of the act

of December 5, 1936 (2nd Sp.Sess., 1937 P.L.2897, No.1),

known as the Unemployment Compensation Law.

"Secretary."  The Secretary of Labor and Industry of the

Commonwealth or the secretary's authorized representative.

"Unemployment Compensation Law."  The act of December 5, 1936

(2nd Sp.Sess., 1937 P.L.2897, No.1), known as the Unemployment

Compensation Law.

"Workers' Compensation Act."  The act of June 2, 1915

(P.L.736, No.338), known as the Workers' Compensation Act.

Section 3.  Independent contractors.

(a)  General rule.--For purposes of workers' compensation,

unemployment compensation and improper classification of

employees provided herein, an individual who performs services

in the commercial carrier industry for remuneration is an

independent contractor only if:

(1)  The individual has a written contract to perform

such services.

(2)  The individual is free from control or direction

over performance of such services both under the contract of

service and in fact.

(3)  As to such services, the individual is customarily

engaged in an independently established trade, occupation,

profession or business.

(b)  Criteria.--An individual is customarily engaged in an

independently established trade, occupation, profession or

business with respect to services the individual performs in the

commercial carrier industry only if:

(1)  The individual possesses the essential tools,

equipment and other assets necessary to perform the services

independent of the person for whom the services are

performed.

(2)  The individual's arrangement with the person for

whom the services are performed is such that the individual

shall realize a profit or suffer a loss as a result of

performing the services.

(3)  The individual performs the services through a

business in which the individual has a proprietary interest.

(4)  The individual maintains a business location that is

separate from the location of the person for whom the

services are being performed.

(5)  The individual:

(i)  previously performed the same or similar

services for another person in accordance with paragraphs

(1), (2), (3) and (4) while free from direction or

control over performance of the services, both under the

contract of service and in fact; or

(ii)  holds himself out to other persons as available

and able, and in fact is available and able, to perform

the same or similar services in accordance with

paragraphs (1), (2), (3) and (4) while free from

direction or control over performance of the services.

(6)  The individual maintains liability insurance during

the term of this contract of at least $50,000.

(c)  Factors not to be considered.--The failure to withhold

Federal or State income taxes or pay unemployment compensation

contributions or workers' compensation premiums with respect to

an individual's remuneration shall not be considered in

determining whether the individual is an independent contractor

for purposes of the Workers' Compensation Act or the

Unemployment Compensation Law.

(d)  Workers' compensation.--

(1)  An individual who is an independent contractor as

determined under this section is not an employee for purposes

of the Workers' Compensation Act. For purposes of this

section, each employment relationship shall be considered

separately.

(2)  Nothing in this act may be construed to affect

section 321(2) of the Workers' Compensation Act.

(e)  Unemployment compensation.--

(1)  For purposes of section 4(l)(2)(B) of the

Unemployment Compensation Law, an individual is customarily

engaged in an independently established trade, occupation,

profession or business with respect to services the

individual performs in the construction industry only if the

criteria in subsection (b) are satisfied.

(2)  Except as provided in paragraph (1), nothing in this

act shall be construed to affect any exclusion from

"employment" as defined in the Unemployment Compensation Law.

Section 4.  Improper classification of employees.

(a)  Violation.--An employer, or officer or agent of an

employer, shall be in violation of this act and shall be subject

to the penalties, remedies and actions contained in this act if

the employer, officer or agent:

(1)  fails to properly classify an individual as an

employee for purposes of the Workers' Compensation Act and

fails to provide the coverage required under the Workers'

Compensation Act; or

(2)  fails to properly classify an individual as an

employee for purposes of the Unemployment Compensation Law

and fails to pay contributions, reimbursements or other

amounts required to be paid under the Unemployment

Compensation Law.

(b) Separate offenses.--Each individual who is not properly

classified as an employee shall be the basis of a separate

violation of this section.

(c)  Order to show cause.--

(1)  If the secretary receives information indicating

that any person has violated this act, the secretary may

investigate the matter and issue an order to show cause why

the person should not be found in violation of this act.

(2)  A person served with an order to show cause shall

have a period of 20 days from the date the order is served to

file an answer in writing.

(3)  If the person fails to file a timely and adequate

answer to the order to show cause, the secretary may,

following notice and hearing, do any of the following:

(i)  petition a court of competent jurisdiction to

issue a stop-work order as provided in section 7; or

(ii)  immediately assess penalties as provided in

section 6.

(d)  Enforcement.--If, subsequent to issuing an order to show

cause under subsection (c), the secretary finds probable cause

that an employer has committed a criminal violation of this act,

the secretary shall refer the matter to the Office of Attorney

General for investigation or impose administrative penalties

under section 6.

(e)  Acting in concert with other parties.--A party that does

not meet the definition of "employer" in section 2, but which

intentionally contracts with an employer knowing the employer

intends to misclassify employees in violation of this act, shall

be subject to the same penalties, remedies or other actions as

the employer found to be in violation of this act.

(f)  Defense.--It shall be a defense to an alleged violation

of this section if the person for whom the services are

performed in good faith believed that the individual who

performed the services qualified as an independent contractor at

the time the services were performed.

Section 5.  Criminal penalties.

(a)  Grading.--An employer, or officer or agent of an

employer, that intentionally violates section 4(a) commits:

(1)  A misdemeanor of the third degree for a first

offense.

(2)  A misdemeanor of the second degree for a second or

subsequent offense.

(b)  Summary offense.--An employer, or officer or agent of an

employer, that negligently fails to properly classify an

individual as an employee under section 4(a) commits a summary

offense and shall, upon conviction, be sentenced to pay a fine

of not more than $1,000. Evidence of a prior conviction under

this subsection shall be admissible as evidence of intent under

subsection (a).

(c)  Concurrent jurisdiction.--

(1)  The Attorney General shall have concurrent

prosecutorial jurisdiction with the district attorney of the

appropriate county for violations under this section and any

offense arising out of the activity prohibited by this

section.

(2)  No person charged with a violation of this section

by the Attorney General shall have standing to challenge the

authority of the Attorney General to prosecute the case, and

if a challenge is made, the challenge shall be dismissed, and

no relief shall be available in the courts of this

Commonwealth to the person making the challenge.

Section 6.  Administrative penalties.

(a)  General rule.--When the secretary finds that a person

has violated this act, the secretary may assess and collect

civil penalties of not more than $1,000 for the first violation,

and not more than $2,500 for each subsequent violation.

(b)  Factors to be considered.--When determining the amount

of the penalty to be imposed, the secretary shall consider

factors including, but not limited to:

(1)  The history of previous violations by the employer.

(2)  The seriousness of the violation.

(3)  The good faith of the employer.

(4)  The size of the employer's business.

Section 7.  Stop-work orders.

(a)  Issuance of order.--

(1)  If the secretary determines, subsequent to the

issuance of an order to show cause under section 4(c), that

an employer, or officer or agent of the employer, has

intentionally failed to properly classify an individual as an

employee under section 4(a), the secretary may petition a

court of competent jurisdiction to issue a stop-work order

requiring the cessation of work by individuals who are

improperly classified within 24 hours of the effective date

of the order, or in the event that a majority of individuals

working at a site are improperly classified, requiring the

cessation of all business operations of that employer at each

site at which a violation occurred within 24 hours of the

effective date of the order.

(2)  The order shall take effect when served upon the

employer, or for a particular employer worksite, when served

at the worksite. The order shall remain in effect until the

court issues an order releasing the stop-work order or upon

finding that the employer, or officer or agent of the

employer, is no longer in violation of this act.

(3)  An order releasing a stop-work order may include a

requirement that the employer file with the department

periodic reports for a probationary period that shall not

exceed two years demonstrating the employer's continued

compliance with this act.

(b)  Applicability of orders and penalties.--Stop-work orders

under subsection (a) and penalties under subsection (c) shall be

in effect against any successor corporation or business entity

that has one or more of the same principals or officers as the

employer against whom the stop-work order was issued or

penalties imposed and which is engaged in the same or equivalent

trade or activity.

(c)  Penalty.--The court shall assess a penalty of $1,000 per

day against an employer for each day that the employer conducts

business operations that are in violation of a stop-work order

issued under this section.

Section 8.  Procedure.

(a)  Hearings.--Actions taken under sections 4(c) and 6 shall

be subject to the provisions of 2 Pa.C.S. (relating to

administrative law and procedure).

(b)  Subpoena powers.--The department shall have the power to

subpoena witnesses, administer oaths, examine witnesses and take

testimony or compel the production of documents. The secretary

may petition the Commonwealth Court to enforce any order or

subpoena issued under this act.

Section 9.  Certain agreement prohibited.

(a)  Violation.--No person may require or demand that an

individual enter into an agreement or sign a document that

results in the improper classification of that individual as an

independent contractor.

(b)  Penalty.--A violation of subsection (a) shall be

punishable by an administrative fine of not less than $1,000 and

not more than $2,500. Each violation shall be considered a

separate offense under this section.

Section 10.  Retaliation for action prohibited.

(a)  General rule.--It shall be unlawful for an employer, or

officer or agent of an employer, to discriminate in any manner

or take adverse action against any person in retaliation for

exercising rights protected under this act. Rights protected

under this act include, but are not limited to, the right to

file a complaint or inform any person about an employer's

noncompliance with this act.

(b)  Good faith allegations of noncompliance.--A person who

in good faith alleges noncompliance with this act shall be

afforded the rights provided by this act, notwithstanding the

person's failure to prevail on the merits.

(c)  Rebuttable presumptions.--Taking adverse action against

a person within 90 days of the person's exercise of rights

protected under this act shall raise a rebuttable presumption of

having done so in retaliation for the exercise of those rights.

Section 11.  Availability of information.

The department shall create a poster for job sites which

outlines the requirements and penalties under this act and shall

make the poster available on its Internet website. At the

discretion of the secretary, a toll-free hotline telephone

number may be established to receive alleged violations.

Section 12.  Use of penalty funds.

Any sum collected as a penalty under:

(1)  Sections 6, 7 and 9 for a violation of section 4(a)

(1) shall be paid into the Workers' Compensation

Administration Fund.

(2)  Sections 6, 7 and 9 for a violation of section 4(a)

(2) shall be paid into the Special Administration Fund

created under section 601.1 of the Unemployment Compensation

Law.

(3)  Section 9 for a violation of any other provision of

this act shall be divided equally between the Workers'

Compensation Administration Fund and the Special

Administration Fund.

Section 13.  Rules and regulations.

The department shall promulgate regulations necessary to

implement this act within 180 days of the effective date of this

section.

Section 14.  Annual report required.

The department shall submit an annual report to the General

Assembly by March 1 of the year following the first full year in

which this act is in effect, and each year thereafter,

detailing, to the maximum extent possible, data on the previous

calendar year's administration and enforcement of this act. The

department may include any relevant facts and statistics that it

believes necessary in the content of the report.

Section 15.  Severability.

The provisions of this act are severable. If any provision of

this act or its application to any individual or circumstance is

held invalid, the invalidity shall not affect other provisions

or applications of this act which can be given effect without

the invalid provision or application.

Section 16.  Construction of law.

(a)  Other laws.--Nothing contained in this act may be

construed to impair or affect in any manner the ability of the

department and secretary to carry out the powers and duties

prescribed by the laws of this Commonwealth.

(b)  Other industries.--The department is not precluded from

finding misclassification in any industry on the basis of the

laws of this Commonwealth.

Section 30.  Effective date.

This act shall take effect immediately.