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New Maryland Law On Independent Contractors

Published by on October 7, 2009

A new Maryland law (the Workplace Fraud Act of 2009 (HB 819) — a copy of the statute is here), set to take effect on October 1, 2009, was designed to prevent the misclassification of employees in the construction and landscaping services as independent contractors.  More after the break. The law imposes penalties of up to […]

A new Maryland law (the Workplace Fraud Act of 2009 (HB 819) — a copy of the statute is here), set to take effect on October 1, 2009, was designed to prevent the misclassification of employees in the construction and landscaping services as independent contractors.  More after the break.

The law imposes penalties of up to $1,000 (and up to $5,000 if done knowingly) on employers who misclassify their employees, and places the burden on the employer to show that an independent contractor relationship exists.  The law establishes the following guidelines for determining whether a worker is an independent contractor:

1) The individual who performs the work is free from control and direction over its performance both in fact and under the contract;

2) The individual customarily is engaged in an independent business or occupation of the same nature as that involved in the work; and

3) The work is either outside the usual course of business of the person for whom it is performed, or it is performed outside of any place of business of the person for whom it is performed.

The new law also grants the Commissioner of Labor and Industry the power to investigate potential violations by entering worksites to gather information, including copying records and interviewing workers.  If the Commissioner finds a violation, he can issue a citation to the employer.  The employer can then request a hearing before an administrative law judge, whose decision is appealable to the circuit court.  If a final order is not issued, a worker who feels he was misclassified can bring a civil action against the employer for damages, including attorneys’ fees.

The law also imposes recordkeeping requirements for employers who hire independent contractors, including written notice to the contractor of his status at the time of hire and an explanation of the implications involved.  Employers must also keep records containing the classification of all employees, their rate of pay, the amount paid each pay period, and hours worked.

Contributed by Claudia L. Guzman

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