The Pennsylvania Construction Workplace Misclassification Act was signed into law on October 13, 2010. Also called House Bill 400 and Act 72 of 2010, the new law went into effect on February 10, 2011.
Earlier this month, the Pennsylvania Department of Labor and Industry published three documents on its website related to the Construction Workplace Misclassification Act: a summary of the Act; a Construction Workplace Misclassification Complaint Form; and a Construction Workplace Misclassification Act poster that presumably employers would file at their worksites. There is no language in the Act that requires companies to post the new law, and the poster does not state that it must be posted.
As noted in our prior blog post on this new law, the law imposes civil and criminal liability for misclassification of construction workers as independent contractors; it also creates a nine-part test for construction companies to meet if they wish to continue to classify workers as independent contractors. One of the requirements is a written independent contractor agreement which complies with the new law.
Takeaway 1: When drafting or revising an independent contractor agreement to comply with the law, construction companies should take the opportunity to restructure their relationships with their independent contractors to maximize the likelihood that (a) the agreements will be drafted in a manner that will satisfy the requirements of the new Pennsylvania law, and (b) the relationships between construction companies and their independent contractors, in fact, mirrors the provisions in the contract. All too often, the written agreement looks and sounds like it complies with the law, but the facts “on the ground” deviate materially from the provisions in the contract. Construction companies that only address the need to have a written agreement are giving themselves a false sense of security. As the new law states in the second factor, the individual must be “free from control or direction over the performance of such services under the contract and in fact.”
This second factor cannot therefore be fulfilled by simply reciting in the contract that the independent contractor is “free from control or direction over the performance of [construction] services.” Using Pepper’s “IC Diagnostics” and “48 Factors Plus” analysis, the lack of control and direction over the performance of services can be a matter of “fact,” as well.
Takeaway 2: For other steps that construction industry businesses should take to ensure compliance with the new law, see “Steps to Ensure Compliance” at the end of the Client Alert co-authored by Bruce Ficken (the Chair of Pepper Hamilton’s Construction Industry Practice Group) and Richard Reibstein (the author of this blog post and Co-Chair of Pepper’s Independent Contractor Compliance Practice Group).
Your comments are invited.