During the 2020 General Assembly Session a number of proposals dealt with the issue of employers misclassifying workers as independent contractors. Below you will find new laws impacting the use of independent contractors. These bills will go into effect on July 1, 2021 unless otherwise noted.
HB 1407 and SB 744 Misclassification of employees as independent contractors; Department of Taxation to investigate
- Prohibits an employer from classifying an individual as an independent contractor if he is an employee.
- An individual shall be considered an employee of the party that pays the remuneration for purposes of Titles 40.1 (Labor and Employment), 58.1 (Taxation), 60.2 (Unemployment Compensation), and 65.2 (Workers’ Compensation) unless it is demonstrated that such individual is an independent contractor.
- The Department of Taxation shall determine whether an individual is an independent contractor by applying Internal Revenue Service guidelines.
- Violators are subject to civil penalties and debarment from public contracts.
- The bill has a delayed effective date of January 1, 2021.
HB 984 and SB 894 Misclassification of workers; cause of action
- Authorizes an individual who has not been properly classified as an employee to bring a civil action or lawsuit for damages against his employer for failing to properly classify the employee if the employer had knowledge of the individual’s misclassification.
- The court may award damages in the amount of any wages, salary, employment benefits, including expenses incurred by the employee that would otherwise have been covered by insurance, or other compensation lost to the individual, a reasonable attorney fee, and the costs incurred by the employee in bringing the action.
- The measure provides that an individual who performs services for a person for remuneration shall be presumed to be an employee unless it is shown that the individual is an independent contractor as determined under the Internal Revenue Service guidelines.
HB 1199 and SB 662 – Employee misclassification; retaliatory actions prohibited, civil penalty
- Prohibits an employer from discharging, disciplining, threatening, discriminating against, or penalizing an employee or independent contractor because the employee or independent contractor reported or plans to report that an employer has failed to properly classify an individual as an employee and failed to pay required benefits or other contributions.
- The measure also prohibits such actions against an employee or independent contractor who is requested or subpoenaed by an appropriate authority to participate in an investigation, hearing, or inquiry by an appropriate authority or in a court action.
- These prohibitions apply only if an employee or independent contractor acts in good faith and upon a reasonable belief that the information is accurate.
- The measure authorizes the Commissioner of Labor and Industry to institute proceedings against an employer who has taken such prohibited retaliatory action.
- Available remedies include reinstatement of the employee and recovery of lost wages. An employer that violates these provisions is subject to a civil penalty equal to the employee’s lost wages.
SB 429 Child support; withholding from income of an independent contractor
- Clarifies that income earned by an independent contractor may be withheld by court order for payment of child support obligations.
