Update regarding the Construction Workplace Misclassification Act
On February 10, 2011, the Construction Workplace Misclassification Act (CWMA) took effect in Pennsylvania, ushering in a new era of heightened scrutiny for businesses that classify employees as independent contractors. While there have yet to be any legal decisions further explaining the reach of the new law, affected employers should be aware of the following features and developments.
The CWMA includes a built-in “good faith” defense for employers accused of CWMA violations. The Act states that a defense to such a violation exists if the person for whom the services are performed believed in good faith that the individual who performed the services qualified as an independent contractor at the time the services were provided. Until several cases are tried, however, the extent to which employers must prove “good faith” is unknown. Affected employers should instead take proactive steps in order to ensure compliance, including:
a) Determine how many workers are utilized as independent contractors by performing an internal audit.
b) reclassify workers and groups of workers previously classified as independent contractors according to the test provided in the CWMA (discussed here.)
c) Review the company’s contracts and relationships with legitimate independent contractors to ensure that these agreements will remain intact despite greater scrutiny.
Employers should also be aware of several CWMA-related forms posted on the Pennsylvania Department of Labor and Industry’s website. There is no indication from the Department of Labor and Industry that employers must provide these forms within the workplace.
a) A complaint form, which asks for information regarding tools supplied by a given employer, whether certain employees have their own liability insurance, and how workers on a given job are paid. This form provides further insight into what factors are considered when an employer is under investigation for alleged CWMA violations. Available at: http://iccomplianceph.files.wordpress.com/2011/02/pa-construction-workplace-misclassification-complaint-form.pdf
b) A warning poster, aimed specifically at individuals holding themselves out as independent contractors. Available at: http://iccomplianceph.files.wordpress.com/2011/02/pa-construction-workplace-misclassification-act-poster.pdf
