According to an article published in the Bangor Daily News on January 23, 2011, Maine Governor Paul LePage has abolished a task force created by his predecessor to examine independent contractor misclassification in Maine and instead has taken a step that Congress may also wish to consider: using the federal common law test for determining if a worker is an “independent contractor” or “employee.”
The article by Mal Leary of the Capitol News Service also states that Governor LePage has asked his staff to draft legislation to replace the varying standards for determining who is and who is not an independent contractor (IC) under state law. Current Maine law, he said, has differing definitions and guidelines for income tax purposes, unemployment, and workers’ compensation coverage. “We will be submitting legislation to [add] some remedies to [misclassification] and make [the definition] consistent so that all agencies and all businesses have the same definition,” the Governor said.
This proposal by Governor LePage dovetails with a commentary posted on this site on October 27, 2010: “Congress Misfires with Double-Barreled Approach to Misclassification of Employees as Independent Contractors.” The post noted that in 2010 Congress had introduced both a labor bill and a tax bill that were both intended to discourage businesses from misclassifying employees as ICs, but that the two bills contained different tests for determining whether the individual in question was an IC or employee.
The publisher of this blog post commented that the definition of “employee” in the tax bill was consistent with the legal standard used by the U.S. Supreme Court to determine a worker’s classification and was consistent with the prevailing “common law” standard for ICs applied by the courts under most federal labor laws and the federal tax code. In contrast, the labor bill introduced by Congress made reference to a definition of “employee” that had its roots in New Deal legislation enacted over 70 years ago to regulate child labor law. The posting called upon Congress to modify the definition of “employee” within the labor bill so that it used the same wording found in the tax bill for determining employee or IC status.
Observation: Other state legislatures and governors may find that this approach by Governor LePage serves the two objectives most often repeated by proponents of legislation to curtail IC misclassification – to reduce the tax gap created by misclassification and afford misclassified employees the workplace protections they were intended to receive – yet provides businesses and workers with one common IC test rather than multiple and inconsistent tests of who is an IC and who is an employee under different state laws.
Written by Richard Reibstein,