Citations Affected: IC 6-8.1; IC 22-1-1-22; IC 22-2-14; IC 22-3-1-5; IC 22-4-18-8; IC 34-11-2-13.
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 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 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.
A BILL FOR AN ACT to amend the Indiana Code concerning labor
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.
enforcement powers with respect to a practice or policy of the
contractor regarding the classification of an employee;
(2) a corporate officer; or
(3) a member of the board of directors;
of the contractor.
Sec. 4. As used in this chapter, "construction" means any constructing, altering, reconstructing, repairing, rehabilitating, refinishing, refurbishing, remodeling, remediating, renovating, custom fabricating, maintenance, landscaping, improving, wrecking, painting, decorating, demolishing, and adding to or subtracting from any building, structure, airport facility, highway, roadway, street, bridge, alley, bridge, sewer, drain, ditch, sewage disposal plant, waterworks, parking facility, railroad, excavation, or other project, development, real property or improvement, or doing any part of these actions. It is immaterial whether or not the performance of the work described involves the addition of any material or article of merchandise to, or fabrication into, a structure, project, development, real property or improvement described in this section. The term includes moving construction related materials to or from the job site.
Sec. 5. As used in this chapter, "contractor" means any sole proprietor, partnership, firm, corporation, limited liability company, association, or other legal entity that engages in construction authorized by law to do business within Indiana. The term includes a general contractor, a subcontractor, and a lower tiered contractor. The term does not include the state, the federal government, or a political subdivision.
Sec. 6. As used in this chapter, "department" means the department of labor created by IC 22-1-1-1. The term includes the commissioner, employees of the department, and agents authorized by the commissioner to act on behalf of the department.
Sec. 7. As used in this chapter, "interested party" means a person with an interest in compliance with this chapter. The term does not require that a person be aggrieved in order to be considered an interested party.
Sec. 8. As used in this chapter, "political subdivision" has the meaning set forth in IC 36-1-2-13.
Sec. 9. As used in this chapter, "performing services" means 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 by a public fund 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; or
(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;
under subsection (a) against a contractor or an agent of a
(1) intentionally violates this chapter or a rule adopted under 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.
(d) After the second or subsequent violation determined by the department that occurs within five (5) years of an earlier violation, the department shall notify the contractor or the agent of the contractor of the determination and of the right of the contractor or agent of the contractor to seek a hearing on the determination, which must be requested within ten (10) working days after the date of the notice and in accordance with IC 4-21.5-3-2. The failure to request a hearing within the ten (10) working day period will result in immediate placement on, and publication of, the name on a list maintained on the Internet web site of the department as required under section 15(b) of this chapter. If the contractor or agent of the contractor requests a timely hearing, the commissioner shall set a hearing on the alleged violation. The hearing must take place not more than forty-five (45) 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. If the department finds against the contractor or the agent of the contractor, the name of the contractor or the agent of the contractor shall be added to the list. 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.
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 within five (5) years after the
commission of a prior unrelated offense described in this
subsection 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 13(d) 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 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 method 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. A contractor's refusal to cooperate with the department's investigation shall constitute evidence that the contractor has violated 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
(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) 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) 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 party who appears at the conference exclusively through an attorney or other representative unfamiliar with the events at issue is considered to have failed to attend the conference unless, with respect to a contractor, the contractor establishes that it did not employ or control an individual with knowledge of the events at issue. A complainant who fails to attend a factfinding conference may be dismissed from the complaint. A contractor's failure to attend a factfinding conference
constitutes evidence that the contractor has violated this
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 or a rule adopted under 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 or the rule;
(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) 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, within fifteen (15) business days after receipt, file a written petition for review with the department. The petition for review must contain a statement of the basis for the contest. A copy of the petition for review shall be posted contemporaneously with the filing of the petition at or near the place the alleged violation occurred so that the individual whose employment activity was the subject of the complaint may become aware of the contested petition. 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.
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 or a rule adopted under 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) compensatory damages and an amount up to five hundred dollars ($500) for each violation of this chapter or a rule adopted under this chapter;
(3) 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 appropriate; and
(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.