Citations Affected: IC 6-8.1; IC 22-1; IC 22-2; IC 22-3; IC 22-4; IC 34-11.
Synopsis: Employee classification. Provides that an individual
performing services for a contractor is considered to be an employee of
the contractor, with certain exceptions. Provides for investigations of
the employment relationship between an individual and a contractor by
the department of labor, procedures to be followed for investigations,
and for various civil penalties to be assessed by the department of labor
for: (1) the failure to properly classify the individual; and (2) retaliation
against certain persons. Provides that certain information pertaining to
employee classification shared between several state agencies is
confidential and may not be published or open to public inspection.
Provides that a contractor or an agent of the contractor that
intentionally fails to properly classify an individual as an employee
commits a Class C misdemeanor, and that the second or subsequent
intentional violation within five years is a Class D felony.
Effective: July 1, 2008.
January 14, 2008, read first time and referred to Committee on Labor and Employment.
January 22, 2008, amended, reported _ Do Pass.
January 28, 2008, read second time, amended, ordered engrossed.
A BILL FOR AN ACT to amend the Indiana Code concerning labor
department shall establish, administer, and make available a
centralized debt collection program for use by state agencies to collect
delinquent accounts, charges, fees, loans, taxes, civil penalties under
IC 22-2-14-13, or other indebtedness owed to or being collected by
state agencies. The department's collection facilities shall be available
for use by other state agencies only when resources are available to the
(b) The commissioner shall prescribe the appropriate form and manner in which collection information is to be submitted to the department.
(c) The debt must be delinquent and not subject to litigation, claim, appeal, or review under the appropriate remedies of a state agency.
(d) The department has the authority to collect for the state or claimant agency (as defined in IC 6-8.1-9.5-1) delinquent accounts, charges, fees, loans, taxes, or other indebtedness due the state or claimant agency that has a formal agreement with the department for central debt collection.
(e) The formal agreement must provide that the information provided to the department be sufficient to establish the obligation in court and to render the agreement as a legal judgment on behalf of the state. After transferring a file for collection to the department for collection, the claimant agency shall terminate all collection procedures and be available to provide assistance to the department. Upon receipt of a file for collection, the department shall comply with all applicable state and federal laws governing collection of the debt.
(f) The department may use a claimant agency's statutory authority to collect the claimant agency's delinquent accounts, charges, fees, loans, taxes, or other indebtedness owed to the claimant agency.
(g) The department's right to credit against taxes due may not be impaired by any right granted the department or other state agency under this section.
(h) The department of state revenue may charge the claimant agency a fee not to exceed fifteen percent (15%) of any funds the department collects for a claimant agency. Notwithstanding any law concerning delinquent accounts, charges, fees, loans, taxes, or other indebtedness, the fifteen percent (15%) fee shall be added to the amount due to the state or claimant agency when the collection is made.
(i) Fees collected under subsection (h) shall be retained by the department after the debt is collected for the claimant agency and are appropriated to the department for use by the department in administering this section.
(j) The department shall transfer any funds collected from a debtor
to the claimant agency within thirty (30) days after the end of the
month in which the funds were collected.
(k) When a claimant agency requests collection by the department, the claimant agency shall provide the department with:
(1) the full name;
(2) the Social Security number or federal identification number, or both;
(3) the last known mailing address; and
(4) additional information that the department may request;
concerning the debtor.
(l) The department shall establish a minimum amount that the department will attempt to collect for the claimant agency.
(m) The commissioner shall report, not later than March 1 for the previous calendar year, to the governor, the budget director, and the legislative council concerning the implementation of the centralized debt collection program, the number of debts, the dollar amounts of debts collected, and an estimate of the future costs and benefits that may be associated with the collection program. A report to the legislative council under this subsection must be in an electronic format under IC 5-14-6.
(n) The department may not assess a fee to a state agency or a custodial parent for seeking a setoff to a state or federal income tax refund for past due child support.
performing construction services.
Sec. 10. As used in this chapter, "public work" includes any public building, structure, airport facility, highway, roadway, street, alley, bridge, sewer, drain, ditch, sewage disposal plant, water works, parking facility, railroad, excavation, or other project, development, real property, or improvement that is paid for in whole or in part out of public funds or a special assessment. The term also includes any public work leased by a political subdivision under a lease containing an option to purchase.
Sec. 11. (a) An individual performing services for a contractor is considered to be an employee of the contractor unless:
(A) individual has been and will continue to be free from control or direction over the performance of the service for the contractor, both under the individual's contract of service and in fact;
(B) service performed by the individual is outside the usual course of services performed by the contractor; and
(C) individual is engaged in an independently established trade, occupation, profession, or business;
(2) the individual is determined to be a legitimate sole proprietor or partnership because:
(A) the sole proprietor or partnership is performing the service free from the direction or control over the means and manner of providing the service, subject only to the right of the contractor, for whom the service is provided, to specify the desired result;
(B) the sole proprietor or partnership is not subject to cancellation or destruction upon severance of the relationship with the contractor;
(C) the sole proprietor or partnership has a substantial investment of capital in the sole proprietorship or partnership beyond ordinary tools and equipment and a personal vehicle;
(D) the sole proprietor or partnership owns the capital goods, gains the profits, and bears the losses of the sole proprietorship or partnership;
(E) the sole proprietor or partnership makes its services available to the general public or the business community on a continuing basis;
(F) the sole proprietor or partnership includes services rendered on a federal income tax schedule as an
independent business or profession;
(G) the sole proprietor or partnership performs services for the contractor under the sole proprietor's or partnership's name;
(H) the sole proprietor or partnership obtains and pays for the license or permit in the sole proprietor's or partnership's name when the services being provided require a license or permit;
(I) the sole proprietor or partnership furnishes the tools and equipment necessary to provide the service;
(J) if necessary, the sole proprietor or partnership hires its own employees without contractor approval, pays the employees without reimbursement from the contractor, and reports the employees' income to the Internal Revenue Service;
(K) the contractor does not represent the sole proprietor or partnership as an employee of the contractor to its customers; and
(L) the sole proprietor or partnership has the right to choose to perform similar services for others on any basis and at any time; or
(3) the individual is an owner-operator that provides a motor vehicle and the services of a driver under a written contract that is subject to IC 8-2.1-24-23, 45 IAC 16-1-13, or 49 CFR 376, to a motor carrier.
(b) A sole proprietor or partnership that is performing services for a contractor as a subcontractor and does not meet the requirements of subsection (a)(2) is considered an individual for purposes of this chapter.
(c) In determining whether a contractor properly classifies an individual as an employee, the department shall consider whether the contractor does the following on behalf of the individual:
(1) Withholds, reports, and remits payroll taxes.
(2) Pays contributions to the unemployment insurance benefit fund established by IC 22-4-26-1.
(3) Maintains worker's compensation insurance as required by IC 22-3-5.
(4) Pays one and one-half (1 1/2) times the regular hourly rate of wages for hours worked in excess of forty (40) hours in a workweek.
(d) A contractor shall maintain records for a period of not less than five (5) years for an individual performing services for the
contractor, regardless of whether the individual is classified as:
(1) an employee;
(2) an independent contractor;
(3) a sole proprietor; or
(4) a partnership.
(e) Records to be maintained by the contractor must include all documents related to, or tending to establish the nature of, the relationship between the contractor and an individual performing services for the contractor. Records that must be maintained for an individual performing services for the contractor include, but are not limited to:
(C) phone number; and
(D) Social Security number, individual taxpayer identification number or federal tax identification number;
(2) the type of work performed and the total number of days and hours worked;
(3) the method, frequency, and basis on which wages were paid or payments were made;
(4) all invoices, billing statements, or other payment records, including the dates of payments, and any miscellaneous income paid or deductions made;
(5) copies of all contracts with the individual, agreements with the individual, applications for employment by the individual with the contractor, and policy or employment manuals of the employer for the period that the individual performed services for the contractor; and
(6) any federal and state tax documents or other information the department considers relevant or necessary.
Sec. 12. (a) It is a violation of section 11(a) of this chapter for a contractor or an agent of a contractor to fail to properly classify an individual as an employee unless the relationship between the individual and the contractor is excluded under section 11(a) of this chapter.
(b) A contractor is not liable under this chapter for the failure of a subcontractor or a lower tiered subcontractor to properly classify persons performing services as employees.
Sec. 13. (a) In addition to the criminal penalties set forth in section 14 of this chapter, a contractor or an agent of the contractor that violates this chapter is subject to a civil penalty not
to exceed one thousand five hundred dollars ($1,500) for each
violation found by the first audit or investigation performed by the
department. After a second or subsequent audit or investigation,
a contractor or an agent of the contractor is subject to a civil
penalty not to exceed two thousand five hundred dollars ($2,500)
for each repeat violation found by the department within a five (5)
year period after the first violation. For purposes of this section,
each violation of this chapter for each person and for each day the
violation continues shall constitute a separate and distinct
(b) The department shall consider the appropriateness of the amount of a penalty to the contractor or agent of the contractor charged upon the determination of the gravity of the violation.
(c) The department may assess up to twice the civil penalty under subsection (a) against a contractor or an agent of a contractor that:
(1) intentionally violates this chapter; or
(2) obstructs the department during an inspection of a place of employment during an investigation authorized under section 18(a) of this chapter concerning this chapter.
The amount of the penalty determined may be recovered, if necessary, in a civil action brought by the attorney general on behalf of the department. Any uncollected amount under this subsection or subsection (a) is subject to IC 6-8.1-9-14.
Sec. 14. (a) Except as provided in subsection (b), a contractor or an agent of the contractor that intentionally fails to properly classify an individual as an employee under section 11(a) of this chapter commits a Class C misdemeanor.
(b) A contractor or an agent of the contractor that intentionally fails to properly classify an individual as an employee under section 11(a) of this chapter for a second or subsequent violation within five (5) years after the commission of a prior violation commits a Class D felony.
Sec. 15. (a) The department shall post a summary of the requirements of this chapter on its official Internet web site.
(b) The department also shall maintain the list set forth in section 19(e) of this chapter concerning contractors that are barred from performing public works contracts.
Sec. 16. A contractor for which one (1) or more individuals perform services who are not classified as employees under section 11(a) of this chapter shall post and keep posted a notice, prepared by the department, summarizing the requirements of this chapter.
The notice shall be posted in a conspicuous place on a job site
where the individual performs services and in each of the offices of
the contractor. The department shall furnish copies of summaries
without charge to a contractor upon request.
Sec. 17. (a) An interested party may file a complaint with the department against a contractor or an agent of the contractor if the interested party has a reasonable belief that the contractor or the agent of the contractor is in violation of this chapter. The complaint shall be filed on a form to be supplied by the department and in a manner prescribed by the department. The department may not investigate a complaint for a violation alleged to have occurred before January 1, 2009.
(b) The department shall conduct an investigation to ascertain the facts relating to the violation alleged in the complaint and determine whether a violation under this chapter has occurred. The investigation may be made by written or oral inquiry, field visit, conference, or any method or combination of methods the department considers suitable. The following apply to the investigation:
(1) If a contractor refuses to cooperate, the department may make a finding that there is a violation of this chapter.
(2) Complainants must provide the department with a notice of a change of address or telephone number or a prolonged absence from the current address so that the department can fully investigate the complaint. A complainant shall cooperate with the department, provide necessary information, and be available for interviews and conferences upon reasonable notice or request by the department. If a complainant cannot be located or does not respond to reasonable requests by the department, the department may dismiss the individual from the complaint.
(3) The department may investigate alleged violations not longer than three (3) years preceding the date the complaint was filed.
(4) Before making a final determination of a violation, the department shall notify the contractor of the substance of the department's investigation and afford the contractor an opportunity to present any written information within fifteen (15) calendar days for the department to consider in reaching its final determination.
(c) As part of its investigation, the department may convene a factfinding conference in person or by telephone to obtain
additional information or evidence, identify the issues in dispute,
ascertain the positions of the parties, and explore the possibility of
settlement. The factfinding conference must be limited to those
issues the department believes to be relevant. The following apply
to the conference:
(1) Notice of the conference shall:
(A) be given to all parties at least ten (10) calendar days before the conference; and
(B) identify the individual requested to attend on behalf of each party.
(2) A party may be accompanied to a factfinding conference by:
(A) the party's attorney or other representative; and
(B) a translator if necessary.
(3) A departmental investigator shall conduct the conference and control the proceedings. No tape recording, stenographic report, or other verbatim record of the conference may be made. If an individual fails to cooperate at the conference and becomes so disruptive or abusive that a full and fair conference cannot be conducted, the departmental investigator shall exclude the individual from the conference.
(4) A complainant who fails to attend a factfinding conference may be dismissed from the complaint. If a contractor fails to attend a factfinding conference, the department may make a finding that there is a violation of this chapter.
Sec. 18. (a) The department:
(1) may conduct investigations in connection with the administration and enforcement of this chapter;
(2) shall enforce the provisions of this chapter; and
(3) may hire investigators and other personnel necessary to carry out the purpose of this chapter.
(b) An employee of the department has authority to visit and inspect, at all reasonable times, a worksite subject to the provisions of this chapter and has authority to inspect, at all reasonable times, documents related to the determination of whether an individual is an employee under section 11(a) of this chapter.
(c) The commissioner or a representative of the commissioner may:
(1) compel, by subpoena, the attendance and testimony of witnesses and the production of books, payrolls, records, papers, and other evidence in an investigation; and
(2) administer oaths to witnesses.
Sec. 19. (a) Whenever the department believes, after investigation, that a violation of this chapter has occurred, the department may:
(1) issue and cause to be served on a person an order to cease and desist from further violation of the chapter;
(2) take affirmative or other action considered reasonable to eliminate the effect of the violation;
(3) collect the amount of wages, salary, employment benefits, or other compensation denied or lost to an individual; or
(4) assess a civil penalty allowed under section 13 of this chapter.
A civil penalty assessed by the department and any other relief requested by the department is recoverable in an action brought by the attorney general.
(b) When it appears to the department that a contractor or an agent of the contractor has violated a valid order of the department issued under this chapter, the department may:
(1) commence an action through the attorney general; and
(2) seek an order from the superior or circuit court in the county in which the contractor does business, mandating the contractor or the agent of the contractor to obey the order of the department.
The failure of the contractor or the agent of the contractor to obey the order of the court is contempt of court.
(c) Whenever the department determines that a violation of this chapter has occurred, the department shall notify the contractor or agent of the contractor in writing of the violation. A contractor or an agent of a contractor that receives:
(1) an order based on a violation;
(2) a civil penalty assessment;
(3) a cease and desist order; or
(4) any combination of subdivisions (1) through (3);
from the department may seek a hearing on the determination by filing a written petition for review with the department within ten (10) business days after receipt of the determination and in accordance with IC 4-21.5-3-2. The petition for review must contain a statement of the basis for the contest. The department shall mail a copy of the petition for review to the complainant and to any interested party designated on the complaint. The contractor shall post a copy of the petition for review contemporaneously with the filing of the petition at or near the place where the alleged violation occurred, or if the contractor is
no longer performing services at the place where the alleged
violation occurred, at the contractor's principal place of business
in a conspicuous place where labor notices regularly are posted.
Further, the contractor shall post a bond in an amount sufficient
to pay wages, salary, employment benefits, or other compensation
lost or denied to the individual as determined by the department
and civil penalties assessed by the department contemporaneously
with the filing of the petition. If the contractor or an agent of the
contractor does not file a petition for review and post a bond
within the ten (10) business day period, the department's
determination shall be final.
(d) If the contractor or agent of the contractor files a timely petition for review, the commissioner shall set a hearing on the alleged violation. The hearing must take place not more than forty-five (45) calendar days after the receipt of the request for the hearing by the department. The hearing must be held in accordance with IC 4-21.5.
(e) After the second or subsequent violation determined by the department that occurs within five (5) years of an earlier violation, the department shall place the contractor's name on a list maintained on the Internet web site of the department as required under section 15(b) of this chapter. A contract for a public work may not be awarded by the state or a political subdivision to:
(1) a contractor whose name appears on the list; or
(2) a firm, a corporation, a partnership, or an association in which the contractor has an interest;
until four (4) years have elapsed after the posting of the name on the list. If a contractor or agent of the contractor files a timely petition for review as set forth under subsection (c), the contractor's name shall not be added to the list until the department's determination that the contractor or agent of the contractor has violated this chapter is final.
Sec. 20. (a) The employee classification fund is established to:
(1) administer this chapter;
(2) investigate contractors and agents of contractors; and
(3) fund other expenses incurred in carrying out the duties of the department under this chapter.
The fund consists of civil penalties collected by the department under this chapter. The fund shall be administered by the department.
(b) The expenses of administering the fund shall be paid from money in the fund.
(c) The treasurer of state shall invest the money in the fund not currently needed to meet the obligations of the fund in the same manner as other public money may be invested. The interest that accrues from these investments shall be deposited in the fund.
(d) Money in the fund at the end of a state fiscal year does not revert to the state general fund.
Sec. 21. (a) It is a violation of this chapter for a contractor or an agent of a contractor to retaliate through discharge or in any other manner against a person for exercising a right granted under this chapter. Retaliation subjects a contractor or an agent of a contractor to civil penalties under section 13 of this chapter or a private cause of action, or both.
(b) It is a violation of this chapter for a contractor or an agent of a contractor to retaliate against a person for:
(1) making a complaint to a contractor or an agent of a contractor, to a coworker, to a community organization, to a state or federal agency, or within a public hearing that rights guaranteed under this chapter have been violated;
(2) causing a proceeding under or related to this chapter to be instituted; or
(3) testifying or preparing to testify in an investigation or proceeding under this chapter.
Sec. 22. (a) An interested party or a person aggrieved by a contractor or an agent of a contractor for a violation of this chapter may file suit in circuit court in the county where the alleged offense occurred or where any person who is a party to the action resides, without regard to exhaustion of any alternative administrative remedies provided in this chapter. An action may be brought by one (1) or more persons on behalf of the person and other persons similarly situated. A person whose rights have been violated under this chapter by a contractor or an agent of a contractor is entitled to collect:
(1) the amount of any wages, salary, employment benefits, or other compensation denied or lost to the person because of the violation;
(2) any other compensatory damages and an amount up to five hundred dollars ($500) for each violation of this chapter;
(3) in the case of an intentional violation or obstruction of the department during an inspection, punitive damages in an amount equal to the civil penalties assessed under section 13(c) of this chapter;
(4) in the case of unlawful retaliation as set forth in section 21
of this chapter, all legal or equitable relief, or both, as
(5) attorney's fees and costs.
(b) The right of an interested party or aggrieved person to bring an action under this chapter terminates three (3) years after the final date of performing services for the contractor by the affected employee. The period of limitation is tolled if the contractor or an agent of the contractor has deterred a person's exercise of rights under this chapter.
Sec. 23. (a) A person may not waive any provision of this chapter.
(b) A contractor or an agent of a contractor that recklessly, knowingly, or intentionally attempts to induce an individual to waive any provision of this chapter commits a Class C misdemeanor.
Sec. 24. A finding made under this chapter:
(1) is for the purpose of enforcing this chapter; and
(2) is not admissible or binding against a party in another proceeding.
Sec. 25. The department, the department of workforce development established by IC 22-4.1-2-1, the department of state revenue established by IC 6-8.1-2-1, and the worker's compensation board of Indiana created by IC 22-3-1-1(a) shall cooperate under this chapter by sharing information concerning any suspected misclassification of an employee as an independent contractor by a contractor or an agent of a contractor. Upon determining that a contractor or an agent of a contractor has classified an employee as an independent contractor in violation of this chapter, the department shall notify the:
(1) department of workforce development, which shall check the contractor's compliance with laws under IC 22-4 and IC 22-4.1;
(2) the department of state revenue, which shall check the contractor's compliance with laws under IC 6; and
(3) the worker's compensation board of Indiana, which shall check the contractor's compliance with laws under IC 22-3.