SENATE AMENDED

 

PRIOR PRINTER'S NOS. 1162, 1652, 1707

PRINTER'S NO.  4289

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

400

Session of

2009

  

  

INTRODUCED BY LENTZ, BELFANTI, M. SMITH, EACHUS, BARBIN, BARRAR, BRENNAN, BRIGGS, BUXTON, CALTAGIRONE, CARROLL, CIVERA, CONKLIN, D. COSTA, P. COSTA, CRUZ, DALEY, DeLUCA, DePASQUALE, DeWEESE, DiGIROLAMO, DRUCKER, J. EVANS, FRANKEL, FREEMAN, GALLOWAY, GEORGE, GERBER, GERGELY, GIBBONS, GODSHALL, GOODMAN, GRUCELA, HALUSKA, HARKINS, HORNAMAN, JOSEPHS, W. KELLER, KIRKLAND, KORTZ, MANDERINO, MANN, MARSHALL, McCALL, McGEEHAN, McILVAINE SMITH, MELIO, MICOZZIE, MUNDY, MURPHY, MURT, MUSTIO, MYERS, M. O'BRIEN, PASHINSKI, PAYTON, PERZEL, PETRARCA, PETRI, PRESTON, SABATINA, SANTARSIERO, SEIP, SIPTROTH, SOLOBAY, STURLA, J. TAYLOR, VEREB, WAGNER, WALKO, WANSACZ, WHITE, YOUNGBLOOD, BURNS, BOYLE, BRADFORD, K. SMITH AND DEASY, MARCH 19, 2009

  

  

SENATOR GORDNER, LABOR AND INDUSTRY, IN SENATE, AS AMENDED, SEPTEMBER 21, 2010   

  

  

  

AN ACT

  

1

Providing for the criteria for independent contractors in the

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construction industry and for the powers and duties of the

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Department of Labor and Industry and the Secretary of Labor

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and Industry; and imposing penalties.

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The General Assembly of the Commonwealth of Pennsylvania

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hereby enacts as follows:

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Section 1.  Short title.

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

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Workplace Fraud Misclassification Act.

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Section 2.  Legislative intent.

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The General Assembly finds that increasingly employers in the

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construction industry are improperly classifying employees as

 


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independent contractors or paying unreported compensation in

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order to evade their responsibilities as employers with respect

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to compliance with Federal and State laws. These actions also

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deprive these workers of Social Security benefits and other

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benefits, including overtime pay, while reducing the employers'

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Federal and State tax withholdings and related obligations.

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These practices put employers that bear higher business costs

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for complying with applicable law at a competitive disadvantage

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with those who do not follow the law. In order to restrict these

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actions, the General Assembly hereby finds the need to enact

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clear statutory guidelines for the construction industry to

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define the difference between an independent contractor and an

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employee for purposes of applicable laws. The General Assembly

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further finds a need to enact stiff criminal and civil penalties

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for employers who knowingly and intentionally misclassify

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employees as independent contractors in order to ensure that the

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practice is not financially advantageous to those employers as

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they compete against employers that are in compliance with the

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law.

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Section 3.  Definitions.

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The following words and phrases when used in this act shall

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have the meanings given to them in this section unless the

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context clearly indicates otherwise:

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"Construction."  Erection, reconstruction, demolition,

25

alteration, modification, custom fabrication, building,

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assembling, site preparation and repair work or maintenance work

27

done on any real property or premises under contract, whether or

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not the work is for a public body and paid for from public

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funds.

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

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Commonwealth.

2

"Employer."  The term includes any individual, partnership,

3

association, joint stock company, corporation, business trust or

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any other person or groups of persons acting directly or

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indirectly in the interest of an employer in relation to an

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employee and who is engaging in or performing services in the

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commercial or residential building construction industry for

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remuneration.

9

"Minimum Wage Act."  The act of January 17, 1968 (P.L.11,

10

No.5), known as The Minimum Wage Act of 1968.

11

"Remuneration."  All compensation including, but not limited

12

to, wages and employee benefits paid to an employee.

13

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

14

Commonwealth or the secretary's authorized representative.

15

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

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

17

Compensation Law.

18

"Wage Payment and Collection Law."  The act of July 14, 1961

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(P.L.637, No.329), known as the Wage Payment and Collection Law.

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

21

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

22

Section 4.  Certain services deemed employment and exceptions.

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(a)  General rule.--For purposes of the Minimum Wage Act, the

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Wage Payment and Collection Law, the Unemployment Compensation

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Law and the Workers' Compensation Act, an individual engaging in

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or performing services in the commercial or residential building

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construction industry for remuneration is presumed to be an

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employee unless:

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(1)  the individual has been and is free from control or

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direction over performance of such services both under the

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contract of service and in fact; and

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(2)  as to such services, the individual is customarily

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engaged in an independently established trade, occupation,

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profession or business.

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(b)  Independent contractor criteria.--An individual engaging

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in or performing services in the commercial or residential

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building construction industry for remuneration shall be deemed

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an independent contractor if the individual can demonstrate, by

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credible evidence, that the individual meets all of the

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following criteria:

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(1)  Maintains a separate business location that is

12

separate from the location of the person or entity for whom

13

services are being performed, with the individual's own

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office, and operates with owned or leased equipment and other

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facilities.

16

(2)  Operates under contracts which are in writing and

17

which contracts articulate plainly the precise terms of

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payment for work performed, the work to be performed and a

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specific prohibition on the retention by the independent

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contractor of any other personnel to perform any part of the

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work described in the contract other than employees of the

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independent contractor and other contractors that can

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demonstrate by credible evidence that they meet the criteria

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of this subsection.

25

(3)  Includes income and losses from services rendered on

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a Federal income tax schedule as an independent business or

27

profession.

28

(4)  Incurs the main expenses related to the work.

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(5)  Is responsible for the satisfactory completion of

30

the work and is liable for a failure to complete the work.

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(6)  Realizes a profit or loss under contracts to perform

2

work.

3

(7)  The success or failure of the individual's business

4

depends on the relationship of business receipts to

5

expenditures.

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(8)  Has through ownership, or a written and executed

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leasing arrangement with a person other than the employer,

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the tools, equipment and other assets necessary to perform

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the services.

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(9)  Makes services available to other businesses,

11

governmental agencies in this Commonwealth or to the general

12

public through business advertising, solicitation or other

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marketing efforts reasonably calculated to obtain new

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contracts to provide similar services.

15

(10)  Has continuing or recurring business liabilities or

16

obligations.

17

(11)  Performs the services through a business in which

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the individual has a principal proprietary interest.

19

(12)  Is a United States citizen or is authorized under

20

Federal law to work in the United States, as defined under

21

section 274A of the Immigration and Nationality Act (66 Stat.

22

163, 8 U.S.C. § 1324a).

23

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

24

Federal or State income taxes or pay unemployment compensation

25

taxes with respect to an individual's remuneration shall not be

26

considered in determining whether the individual is an

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independent contractor for purposes of the Unemployment

28

Compensation Law or the Workers' Compensation Act.

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(d)  Construction.--For purposes of this section, each

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employment relationship shall be considered separately.

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Section 5.  Improper classification of employees.

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

3

employer, commits a violation of this act if the employer,

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officer or agent fails to properly classify the individual as an

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employee and shall be subject to the penalties, remedies or

6

actions contained in this act.

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(b)  Enforcement.--When the secretary finds that an employer

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has violated a provision of this act, the secretary may refer

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the matter to the Office of Attorney General for investigation

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and prosecution. Nothing in this act shall be deemed to limit

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the authority of the Attorney General or the District Attorney

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of the appropriate county to investigate and prosecute

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violations of this act.

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(c)  Concurrent jurisdiction to prosecute.--The Attorney

15

General shall have concurrent prosecutorial jurisdiction with

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the district attorney of the appropriate county for violations

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under this section and any crime arising out of the activity

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prohibited by this section. No person charged with a violation

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of this section by the Attorney General shall have standing to

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challenge the authority of the Attorney General to prosecute the

21

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

22

dismissed, and no relief shall be available in the courts of

23

this Commonwealth to the person making the challenge.

24

(d)  Conspiracy by other parties.--A party that does not meet

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the definition of "employer" in section 3, but which contracts

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with an employer knowing the employer intends to misclassify

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employees in violation of this act shall be subject to the same

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penalties, remedies or other actions as the employer found to be

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in violation of this act.

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Section 5.1  Presumption of independent contractor status.

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(a)  Rebuttable presumption.—-An employer that enters into a

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written contract for construction services containing the

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requirements set forth under subsection (b) creates a rebuttable

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presumption that the individual contracted with is an

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independent contractor and the employer has an affirmative

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defense to an allegation under this act that the individual is

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an employee if all of the following are true:

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(1)  The contract is signed by both parties.

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(2)  The employer has in its possession the documents

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identified in subsection (c).

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(b)  Contract terms.—-A written contract between an employer

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and an individual presumed to be an independent contractor under

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this section must contain all of the following:

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(1)  The name, home and business address of the

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individual and the individual’s tax identification number or

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Social Security Number.

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(2)  A description of the work to be performed under the

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contract and plain, precise terms for payment.

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(3)  A section in substantially the following form:

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Independent Contractor Status. The parties to this

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contract acknowledge that they intend that the Contractor

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be considered an independent contractor as described in

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the act of ______________, 2009 (P.L. ___, No. ___),

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known as the Construction Workplace Fraud Act (the "Act")

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and not an employee of the Hiring Party. In furtherance

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of that intention, the parties agree as follows:

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(A)  By his signature on this contract below, the

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Contractor certifies that he meets all of the following

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criteria:

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(i)  He maintains a separate business location

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that is separate from the location of the Hiring

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Party, with the Contractor’s own office, and operates

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with owned or leased equipment and other facilities.

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(ii)  He operates under contracts which are in

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writing and which articulate plainly the precise

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terms of payment for work performed, the work to be

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performed and a specific prohibition against the

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retention by the Contractor of any other personnel to

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perform any part of the work described in the

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contracts other than employees of the Contractor and

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other contractors that can demonstrate, by credible

12

evidence, that they meet all of the criteria of this

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paragraph (A).

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(iii)  He includes income and losses from

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services rendered in a Federal income tax schedule as

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an independent business or profession.

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(iv)  He will incur the primary expenses related

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to the work performed under this contract.

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(v)  He is responsible for the satisfactory

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completion of the work to be performed under this

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contract and is liable for a failure to complete the

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work.

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(vi)  He realizes a profit or loss under

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contracts to perform work.

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(vii)  The success or failure of his business

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depends on the relationship of business receipts to

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expenditures.

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(viii)  He has through ownership, or a written

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and executed leasing arrangement with a person other

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than the Hiring Party, the tools, equipment and other

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assets necessary to perform the work under this

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contract.

3

(ix)  He makes services available to other

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businesses, governmental agencies in this

5

Commonwealth or to the general public through

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business advertising, solicitation or other marketing

7

efforts reasonably calculated to obtain new contracts

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to provide similar services.

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(x)  He has continuing or recurring business

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liabilities or obligations.

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(xi)  He performs services through a business in

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which the Contractor has a principal proprietary

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interest.

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(xii)  He is a United States citizen or is

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authorized under Federal law to work in the United

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States, as defined under section 274A of the

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Immigration and Nationality Act (66 Stat. 163, 8

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U.S.C. §1324a).

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The foregoing are collectively referred to herein as the

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"Independent Contractor Requirements." Failure of the

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Contractor to meet the Independent Contractor

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Requirements during the term of this contract shall

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constitute a material breach by the Contractor of this

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contract. In that event, the Hiring Party shall have the

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right to terminate this contract immediately upon notice

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to the Contractor without penalty.

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(B)  By his signature on this contract below, the

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Hiring Party certifies that he has verified, after

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reasonable investigation, that as of the date of this

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contract the Contractor meets the Independent Contractor

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Requirements except for those requirements set forth in

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subparagraphs (iii), (vi), (vii), (ix) and (xi) of

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paragraph (A) above, which he has not verified.

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(C)  The Contractor agrees that he shall not engage

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any other personnel to perform any part of the work

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described in this contract other than employees of the

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Contractor and other contractors that can demonstrate by

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credible evidence that they meet all of the Independent

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Contractor Requirements.

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(D)  The Contractor agrees that he shall maintain

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liability insurance during the term of this contract of

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at least $1,000,000 and shall provide proof thereof to

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the Hiring Party upon request.

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(c)  Documentation.—-At the time of entering into the

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contract described in subsection (b), the employer shall obtain

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from the individual, and maintain for a period of three years

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thereafter, the following information:

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(1)  Proof of liability insurance in the amount of at

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least $1,000,000.

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(2)  Proof that the individual is a United States citizen

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or is otherwise authorized under Federal law to work in the

22

United States, as defined under section 274A of the

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Immigration and Nationality Act (66 Stat. 163, 8 U.S.C. §

24

1324a).

25

(d)  Loss of presumption.—-If, during the term of the

26

contract, the employer receives knowledge that the individual

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does not meet the criteria set forth in section 4(b) and the

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employer does not terminate the contract as permitted by the

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provisions of the contract set forth in subsection (b), the

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employer shall no longer be entitled to the presumption and

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1

affirmative defense set forth in subsection (a).

2

(e)  Penalty.—-An employer that signs a contract

3

described in subsection (b) knowing that any of the

4

certifications made by the employer in the contract is false

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shall be subject to the administrative penalties set forth in

6

section 7(b) in addition to any other penalties for violation

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of this act to which the employer may be subject.

8

Section 6.  Criminal penalties.

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

10

employer, who intentionally violates section 5(a) commits:

11

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

12

offense.

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

14

subsequent offense.

15

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

16

the employer, that negligently fails to properly classify an

17

individual as an employee under section 5(a) commits a summary

18

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

19

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

20

this subsection shall be admissible as evidence of knowledge

21

under subsection (a).

22

Section 7.  Civil actions and remedies.

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(a)  Debarment.--If the secretary receives information

24

indicating that any employer, or officer or agent of the

25

employer, has intentionally failed to properly classify an

26

employee and has been convicted of the violation, the secretary

27

shall notify all public bodies of the name of the employer, and

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no contract shall be awarded to the employer or to any firm,

29

corporation or partnership in which the employer has an interest

30

for a period of up to three years, as determined by the

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1

secretary, has elapsed from the date of notice to the public

2

bodies. Actions taken under this subsection shall be subject to

3

the provisions of section 9(a).

4

(b)  Administrative penalties.--As an alternative to or in

5

addition to any other sanctions provided by law for a violation

6

of this act, when the secretary finds that an employer has

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violated this act, the secretary is authorized to assess and

8

collect administrative penalties up to a maximum of $2,500 for

9

the first violation and up to a maximum of $5,000 for each

10

subsequent violation. When determining the amount of the penalty

11

imposed because of a violation, the secretary shall consider

12

factors which include the history of previous violations by the

13

employer, the seriousness of the violation, the good faith of

14

the employer and the size of the employer's business. Each

15

employee misclassified by the employer shall constitute a

16

separate offense.

17

(c)  Actions by employees.--An individual who has not been

18

properly classified as an employee may bring a civil action for

19

damages against the employer for knowingly and intentionally

20

failing to properly classify the employee. An individual's

21

representative may bring the action on behalf of the individual

22

or as a class action. The court may award attorney fees and

23

other costs of the action in addition to damages to an

24

individual or class of individuals who have not been properly

25

classified as employees in violation of section 5(a).

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Section 8.  Stop-work orders.

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(a)  Issuance of order.--If the secretary determines, after

28

notice and hearing, that an employer, or officer or agent of the

29

employer, has knowingly and intentionally failed to properly

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classify an individual as an employee under section 5, the

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secretary may issue a stop-work order requiring the cessation of

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all business operations of that employer at each site at which a

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violation occurred within 72 hours of the determination. The

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order shall take effect when served upon the employer or, for a

5

particular employer worksite, when served at the worksite. The

6

order shall remain in effect until the secretary issues an order

7

releasing the stop-work order or upon finding that the employer

8

has properly classified the individual as an employee. The

9

employer shall file with the department periodic reports for a

10

probationary period that shall not exceed two years that

11

demonstrate the employer's continued compliance with this

12

section. The department shall promulgate rules and regulations

13

to determine filing times and report requirements. Actions taken

14

under this subsection shall be subject to the provisions of

15

section 9(a).

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(b)  Applicability of orders.--Stop-work orders under

17

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

18

effect against any successor corporation or business entity that

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

20

employer against whom the stop-work order was issued and which

21

is engaged in the same or equivalent trade or activity.

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

23

per day against an employer for each day that the employer

24

conducts business operations that are in violation of a stop-

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work order issued under this section.

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Section 9.  Procedure.

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(a)  Hearings.--Actions taken under sections 7 and 8 are

28

subject to the right of notice and adjudication and the right of

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appeal in accordance with the provisions of 2 Pa.C.S. (relating

30

to administrative law and procedure).

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

2

subpoena witnesses, administer oaths, examine witnesses and take

3

testimony or compel the production of documents. Upon

4

application of an attorney for the Commonwealth, the department

5

may issue a subpoena to compel the production of the documents,

6

computer records and information relating to compliance with the

7

act.

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Section 10.  Commonwealth Court.

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The secretary may seek enforcement of any order or subpoena

10

in the Commonwealth Court.

11

Section 11.  Certain agreement prohibited.

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(a)  Violation.--No person shall require or request that an

13

individual enter into an agreement or sign a document which

14

results in the misclassification of the individual as an

15

independent contractor or otherwise does not accurately reflect

16

the relationship with the employer.

17

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

18

punishable by a fine of not less than $1,000, nor more than

19

$2,500. Each violation shall be considered a separate offense

20

under this section. 

21

Section 12.  Retaliation for action prohibited.

22

It shall be unlawful for an employer or any other party to

23

discriminate in any manner or take adverse action against any

24

person in retaliation for exercising rights protected under this

25

act. Rights protected under this act include, but are not

26

limited to, the right to file a complaint or inform any person

27

about an employer's noncompliance with this act and the right to

28

inform any person of the person's potential rights and to assist

29

the person in asserting those rights. Any person who in good

30

faith alleges noncompliance with this act shall be afforded the

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rights provided by this act, notwithstanding the person's

2

failure to prevail on the merits. Taking adverse action against

3

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

4

protected under this act shall raise a rebuttable presumption of

5

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

6

Section 13.  Availability of information.

7

The department shall create a poster for job sites which

8

outlines the requirements and penalties under this act and shall

9

make the poster available on its Internet website. At the

10

discretion of the secretary, a toll-free hotline telephone

11

number may be established to receive alleged violations.

12

Section 14.  Use of penalty funds.

13

Any assessments and penalties collected pursuant to this act

14

shall be applied toward implementation, enforcement and

15

administration costs incurred by the department under this act.

16

However, the secretary may transfer an agreed-to amount of

17

moneys collected to the Attorney General to assist in the

18

enforcement of this act.

19

Section 15.  Rules and regulations.

20

The department may promulgate rules and regulations necessary

21

to implement and administer this act.

22

Section 16.  Annual report required.

23

The department shall submit an annual report to the General

24

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

25

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

26

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

27

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

28

department may include any relevant facts and statistics that it

29

believes necessary into the content of the report.

30

Section 17.  Applicability.

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1

This act shall not be construed to bring an individual within

2

the scope of the Minimum Wage Act, the Wage Payment and

3

Collection Law, the Unemployment Compensation Law or the

4

Workers' Compensation Act if the individual is excluded from the

5

scope of the appropriate statute.

6

Section 18.  Severability.

7

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

8

this act or its application to any individual or circumstance is

9

held invalid, the invalidity shall not affect other provisions

10

or applications of this act which can be given effect without

11

the invalid provision or application.

12

Section 19.  Construction of law.

13

Nothing contained in this act shall be construed to impair or

14

affect in any manner the ability of the department to carry out

15

the powers and duties prescribed by the laws of this

16

Commonwealth or to adopt measures to improve the enforcement of

17

other laws of this Commonwealth.

18

Section 20.  Finding.

19

The department shall commence implementation of this act to

20

the extent the secretary determines sufficient funds are

21

available or the General Assembly appropriates additional funds

22

for purposes of this act.

23

Section 21.  Effective date.

24

This act shall take effect in 90 days.

25

Section 2.  Definitions.

<--

26

The following words and phrases when used in this act shall

27

have the meanings given to them in this section unless the

28

context clearly indicates otherwise:

29

"Construction."  Erection, reconstruction, demolition,

30

alteration, modification, custom fabrication, building,

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1

assembling, site preparation and repair work done on any real

2

property or premises under contract, whether or not the work is

3

for a public body and paid for from public funds.

4

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

5

Commonwealth.

6

"Employee."  Either of the following:

7

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

8

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

9

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

10

Compensation Act.

11

(2)  In relation to unemployment compensation, the term

12

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

13

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

14

known as the Unemployment Compensation Law.

15

"Employer."  Either of the following:

16

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

17

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

18

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

19

Compensation Act.

20

(2)  In relation to unemployment compensation, the term

21

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

22

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

23

known as the Unemployment Compensation Law.

24

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

25

Commonwealth or the secretary's authorized representative.

26

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

27

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

28

Compensation Law.

29

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

30

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

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1

Section 3.  Independent contractors.

2

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

3

unemployment compensation and improper classification of

4

employees provided herein, an individual who performs services

5

in the construction industry for remuneration is an independent

6

contractor only if:

7

(1)  The individual has a written contract to perform

8

such services.

9

(2)  The individual is free from control or direction

10

over performance of such services both under the contract of

11

service and in fact.

12

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

13

engaged in an independently established trade, occupation,

14

profession or business.

15

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

16

independently established trade, occupation, profession or

17

business with respect to services the individual performs in the

18

commercial or residential building construction industry only

19

if:

20

(1)  The individual possesses the essential tools,

21

equipment and other assets necessary to perform the services

22

independent of the person for whom the services are

23

performed.

24

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

25

whom the services are performed is such that the individual

26

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

27

performing the services.

28

(3)  The individual performs the services through a

29

business in which the individual has a proprietary interest.

30

(4)  The individual maintains a business location that is

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1

separate from the location of the person for whom the

2

services are being performed.

3

(5)  The individual:

4

(i)  previously performed the same or similar

5

services for another person in accordance with paragraphs

6

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

7

control over performance of the services, both under the

8

contract of service and in fact; or

9

(ii)  holds himself out to other persons as available

10

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

11

the same or similar services in accordance with

12

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

13

direction or control over performance of the services.

14

(6)  The individual maintains liability insurance during

15

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

16

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

17

Federal or State income taxes or pay unemployment compensation

18

contributions or workers' compensation premiums with respect to

19

an individual's remuneration shall not be considered in

20

determining whether the individual is an independent contractor

21

for purposes of the Workers' Compensation Act or the

22

Unemployment Compensation Law.

23

(d)  Workers' compensation.--

24

(1)  An individual who is an independent contractor as

25

determined under section 3 is not an employee for purposes of

26

the Workers' Compensation Act. For purposes of this section,

27

each employment relationship shall be considered separately.

28

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

29

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

30

(e)  Unemployment compensation.--

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1

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

2

Unemployment Compensation Law, an individual is customarily

3

engaged in an independently established trade, occupation,

4

profession or business with respect to services the

5

individual performs in the construction industry only if the

6

criteria in subsection (b) are satisfied.

7

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

8

act shall be construed to affect any exclusion from

9

"employment" as defined in the Unemployment Compensation Law.

10

Section 4.  Improper classification of employees.

11

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

12

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

13

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

14

the employer, officer or agent:

15

(1)  fails to properly classify an individual as an

16

employee for purposes of the Workers' Compensation Act and

17

fails to provide the coverage required under the Workers'

18

Compensation Act; or

19

(2)  fails to properly classify an individual as an

20

employee for purposes of the Unemployment Compensation Law

21

and fails to pay contributions, reimbursements or other

22

amounts required to be paid under the Unemployment

23

Compensation Law.

24

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

25

classified as an employee shall be the basis of a separate

26

violation of this section.

27

(c)  Order to show cause.--

28

(1)  If the secretary receives information indicating

29

that any person has violated this act, the secretary may

30

investigate the matter and issue an order to show cause why

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1

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

2

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

3

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

4

file an answer in writing.

5

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

6

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

7

following notice and hearing, do any of the following:

8

(i)  petition a court of competent jurisdiction to

9

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

10

(ii)  immediately assess penalties as provided in

11

section 6.

12

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

13

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

14

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

15

the secretary shall refer the matter to the Office of Attorney

16

General for investigation or impose administrative penalties

17

under section 6.

18

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

19

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

20

intentionally contracts with an employer knowing the employer

21

intends to misclassify employees in violation of this act, shall

22

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

23

the employer found to be in violation of this act.

24

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

25

of this section if the person for whom the services are

26

performed in good faith believed that the individual who

27

performed the services qualified as an independent contractor at

28

the time the services were performed.

29

Section 5.  Criminal penalties.

30

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

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1

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

2

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

3

offense.

4

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

5

subsequent offense.

6

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

7

employer, that negligently fails to properly classify an

8

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

9

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

10

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

11

this subsection shall be admissible as evidence of intent under

12

subsection (a).

13

(c)  Concurrent jurisdiction.--

14

(1)  The Attorney General shall have concurrent

15

prosecutorial jurisdiction with the district attorney of the

16

appropriate county for violations under this section and any

17

offense arising out of the activity prohibited by this

18

section.

19

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

20

by the Attorney General shall have standing to challenge the

21

authority of the Attorney General to prosecute the case, and,

22

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

23

no relief shall be available in the courts of this

24

Commonwealth to the person making the challenge.

25

Section 6.  Administrative penalties.

26

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

27

has violated this act, the secretary may assess and collect

28

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

29

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

30

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

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1

of the penalty to be imposed, the secretary shall consider

2

factors including, but not limited to:

3

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

4

(2)  The seriousness of the violation.

5

(3)  The good faith of the employer.

6

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

7

Section 7.  Stop-work orders.

8

(a)  Issuance of order.--

9

(1)  If the secretary determines, subsequent to the

10

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

11

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

12

intentionally failed to properly classify an individual as an

13

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

14

court of competent jurisdiction to issue a stop-work order

15

requiring the cessation of work by individuals who are

16

improperly classified within 24 hours of the effective date

17

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

18

working at a site are improperly classified, requiring the

19

cessation of all business operations of that employer at each

20

site at which a violation occurred within 24 hours of the

21

effective date of the order.

22

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

23

employer or, for a particular employer worksite, when served

24

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

25

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

26

finding that the employer, or officer or agent of the

27

employer, is no longer in violation of this act.

28

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

29

requirement that the employer file with the department

30

periodic reports for a probationary period that shall not

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1

exceed two years demonstrating the employer's continued

2

compliance with this act.

3

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

4

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

5

in effect against any successor corporation or business entity

6

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

7

employer against whom the stop-work order was issued or

8

penalties imposed and which is engaged in the same or equivalent

9

trade or activity.

10

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

11

day against an employer for each day that the employer conducts

12

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

13

issued under this section.

14

Section 8.  Procedure.

15

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

16

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

17

administrative law and procedure).

18

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

19

subpoena witnesses, administer oaths, examine witnesses and take

20

testimony or compel the production of documents. The secretary

21

may petition the Commonwealth Court to enforce any order or

22

subpoena issued under this act.

23

Section 9.  Certain agreement prohibited.

24

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

25

individual enter into an agreement or sign a document which

26

results in the improper classification of that individual as an

27

independent contractor.

28

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

29

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

30

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

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1

separate offense under this section.

2

Section 10.  Retaliation for action prohibited.

3

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

4

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

5

manner or take adverse action against any person in retaliation

6

for exercising rights protected under this act. Rights protected

7

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

8

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

9

noncompliance with this act.

10

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

11

in good faith alleges noncompliance with this act shall be

12

afforded the rights provided by this act, notwithstanding the

13

person's failure to prevail on the merits.

14

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

15

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

16

protected under this act shall raise a rebuttable presumption of

17

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

18

Section 11.  Availability of information.

19

The department shall create a poster for job sites which

20

outlines the requirements and penalties under this act and shall

21

make the poster available on its Internet website. At the

22

discretion of the secretary, a toll-free hotline telephone

23

number may be established to receive alleged violations.

24

Section 12.  Use of penalty funds.

25

Any sum collected as a penalty under:

26

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

27

(1) shall be paid into the Workers' Compensation

28

Administration Fund.

29

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

30

(2) shall be paid into the Special Administration Fund

- 25 -

 


1

created under section 601.1 of the Unemployment Compensation

2

Law.

3

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

4

this act shall be divided equally between the Workers'

5

Compensation Administration Fund and the Special

6

Administration Fund.

7

Section 13.  Rules and regulations.

8

The department may promulgate rules and regulations necessary

9

to implement this act.

10

Section 14.  Annual report required.

11

The department shall submit an annual report to the General

12

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

13

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

14

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

15

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

16

department may include any relevant facts and statistics that it

17

believes necessary in the content of the report.

18

Section 15.  Severability.

19

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

20

this act or its application to any individual or circumstance is

21

held invalid, the invalidity shall not affect other provisions

22

or applications of this act which can be given effect without

23

the invalid provision or application.

24

Section 16.  Construction of law.

25

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

26

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

27

department and secretary to carry out the powers and duties

28

prescribed by the laws of this Commonwealth.

29

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

30

finding misclassification in any industry on the basis of the

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1

laws of this Commonwealth.

2

Section 17.  Funding.

3

The department shall not be required to enforce this act

4

until adequate funding is appropriated.

5

Section 30.  Effective date.

6

This act shall take effect in 120 days.

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