Citations Affected: IC 6-3; IC 6-8.1; IC 22-1; IC 22-2; IC 22-3; IC 22-4.1; IC 34-11; IC 36-1.
Synopsis: Employee defined classification. Provides that an individual
performing services for a contractor or subcontractor on a construction
project is considered to be an employee of the contractor or
subcontractor, with certain exceptions. Provides for investigations of
the employment relationship between an individual and a contractor or
subcontractor by the department of labor, for certain procedures to be
followed in investigations, and for various civil penalties to be assessed
by the department of labor for the failure to properly classify
individuals as employees. Provides that certain information pertaining
to employee classification shared among certain state agencies is
confidential. Prohibits the awarding of contracts for certain public work
projects to a contractor or subcontractor for four years after the
contractor or subcontractor is found to have committed certain
recurring improper classifications.
Effective: July 1, 2010.
January 5, 2010, read first time and referred to Committee on Labor and Employment.
January 7, 2010, amended, reported _ Do Pass.
A BILL FOR AN ACT to amend the Indiana Code concerning labor
(1) The independent contractor's name, trade name, address, and telephone number.
(2) The independent contractor's federal identification number or Social Security number.
(3) The name and:
(A) Social Security number;
(B) federal employer identification number (FEIN); or
(C) taxpayer identification number (TIN);
of each person or entity with whom the independent contractor has contracted.
(e) Along with the statement required in subsection (d), an independent contractor shall file annually with the department documentation in support of independent contractor status before being granted a certificate of exemption. The independent contractor must obtain clearance from the department of state revenue before issuance of the certificate.
(f) An independent contractor shall pay a filing fee of
twenty-five dollars ($5) ($25) with the statement required in
subsection (d). The fees collected under this subsection shall be
deposited into a special account in the state general fund known as the
independent contractor information account. Money in the independent
contractor information account is annually appropriated to the
department for its use in carrying out the purposes of this section.
(g) The department shall keep each statement and supporting documentation received under this section on file and on request may verify that a certificate of exemption is on file.
(h) The certificate of exemption required by this section must be on a form prescribed and provided by the department. A certificate issued under this section is valid for one (1) year. The department shall maintain the original certificate on file.
(i) A certificate of exemption must certify the following information:
(1) That the independent contractor has worker's compensation coverage for the independent contractor's employees in accordance with IC 22-3-2 through IC 22-3-7.
(2) That the independent contractor desires to be exempt from being able to recover under the worker's compensation policy or self-insurance of a person for whom the independent contractor will perform work only as an independent contractor.
(j) The department shall provide the certificate of exemption to the person requesting it not less than seven (7) business days after
verifying the accuracy of the supporting documentation. To be given
effect, a certificate of exemption must be filed with the worker's
compensation board of Indiana in accordance with IC 22-3-2-14.5(f)
and IC 22-3-7-34.5(g).
(k) Not more than thirty (30) days after the department receives an independent contractor's statement and supporting documentation and issues a certificate of exemption, the department shall provide the independent contractor with an explanation of the department's tax treatment of independent contractors and the duty of the independent contractor to remit any taxes owed.
(l) The information received from an independent contractor's statement and supporting documentation is to be treated as confidential by the department and is to be used solely for the purposes of this section.
(m) A contractor who knowingly or intentionally causes or assists employees, including temporary employees, to file a false statement and supporting documentation of independent contractor status commits a Class D felony.
(n) If the department determines during an investigation that a contractor or subcontractor improperly has classified an employee as an independent contractor on a construction project, the contractor or subcontractor may conform to the departmental decision by properly classifying the employee found to be misclassified as an independent contractor within seven (7) business days after notification of the determination by the department, making all necessary payments on behalf of the employee, and no fee or penalty is due. In addition, the department shall revoke the certificate of exemption provided under subsection (j) to the employee who has not been properly classified. The filing fee paid under subsection (f) shall not be returned to the individual who had claimed to be an independent contractor.
(o) A contractor or subcontractor who continues to improperly classify an employee as an independent contractor on a construction project more than seven (7) business days after notification by the department of the determination of the misclassification under subsection (n) is subject to a civil penalty of five hundred dollars ($500) per employee, to be paid to the department. The penalties collected under this subsection shall be deposited into the special account in the state general fund established under subsection (f) and known as the independent contractor information account. IC 6-8.1-3-12 applies to the investigation and IC 6-8.1-5-1 applies to the assessment of tax due
concerning the determination of the failure to properly classify an
employee under this section.
(p) If a contractor or a subcontractor claims to have conformed to the department's decision under subsection (n), and upon further investigation the contractor or subcontractor is found to have continued the improper classification or has not remedied fully the violation, the contractor or subcontractor is subject immediately to double the civil penalty under subsection (o) per employee who has been improperly classified.
(q) An independent contractor who fails to file a statement as required by subsection (d) shall be assessed a civil penalty of five hundred dollars ($500) by the department. A civil penalty assessed and paid under this subsection shall be deposited into the special account in the state general fund established under subsection (f) and known as the independent contractor information account.
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.
FOLLOWS [EFFECTIVE JULY 1, 2010]: Sec. 16. The commissioner
of labor and
his an authorized representative of the commissioner of
labor shall have the power and the authority to enter any place of
employment for the purpose of collecting facts and statistics relating to
the employment of workers and of making inspections for the proper
enforcement of all of the labor laws of this state, including IC 5-16-7
and IC 22-2-15. No employer or owner shall refuse to admit the
commissioner of labor or his authorized representatives of the
commissioner of labor to his the employer's or owner's place of
structure, project, development, real property, or improvement
described in this section.
(c) The term defined in subsection (a) includes moving construction related materials to or from the job site.
Sec. 6. (a) 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.
(b) The term includes a general contractor, a subcontractor, and a lower tiered contractor.
(c) The term does not include the state, the federal government, or a political subdivision.
Sec. 7. (a) As used in this chapter, "department" refers to the department of labor created by IC 22-1-1-1.
(b) The term includes the commissioner, employees of the department of labor, and agents authorized by the commissioner to act on behalf of the department of labor.
Sec. 8. (a) As used in this chapter, "department of revenue" refers to the department of state revenue established by IC 6-8.1-2-1.
(b) The term includes the commissioner, employees of the department of revenue, and agents authorized by the commissioner to act on behalf of the department of revenue.
Sec. 9. (a) As used in this chapter, "department of workforce development" refers to the department of workforce development established by IC 22-4.1-2-1.
(b) The term includes the commissioner, employees of the department of workforce development, and agents authorized by the commissioner to act on behalf of the department of workforce development.
Sec. 10. (a) As used in this chapter, "interested party" means a person with an interest in compliance with this chapter, including the state or a political subdivision.
(b) This section does not require that a person be aggrieved in order to be considered an interested party.
Sec. 11. As used in this chapter, "performing services" means performing construction services.
Sec. 12. As used in this chapter, "political subdivision" has the meaning set forth in IC 36-1-2-13.
Sec. 13. As used in this chapter, "subcontractor" has the meaning set forth in IC 36-1-12-1.2(3).
Sec. 14. 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; and
(B) 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 without substantial direction and control as to the means and manner of providing the services, 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 has a substantial investment of capital in the sole proprietorship;
(C) the sole proprietor or partnership owns the capital goods, gains the profits, and bears the losses of the sole proprietorship or partnership;
(D) the sole proprietor or partnership makes its services available to the general public or the business community on a continuing basis;
(E) the sole proprietor or partnership includes services rendered on a federal income tax schedule as an independent business or profession;
(F) the sole proprietor or partnership performs services for the contractor under the sole proprietor's or partnership's name and the contractor pays the sole proprietor or partnership a flat fee or other agreed amount of compensation that is not based on an established rate for any time period of work;
(G) 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;
(H) the sole proprietor or partnership furnishes the tools and equipment necessary to provide the service;
(I) if necessary, the sole proprietor or partnership hires its own employees, pays the employees without reimbursement from the contractor, and reports the employees' income to the Internal Revenue Service;
identification number, or federal tax identification
(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 or subcontractor, and policy or employment manuals of the employer for the period that the individual performed services for the contractor or subcontractor; and
(6) any federal and state tax documents or other information the department considers relevant or necessary.
Sec. 17. (a) An interested party may file a complaint with the department against a contractor or a subcontractor if the interested party has a reasonable belief that the contractor or subcontractor is in violation of this chapter. The department may not investigate a complaint for a violation alleged to have occurred before January 1, 2011.
(b) Upon receiving a complaint under subsection (a), the department immediately shall commence 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 department:
(1) shall conduct investigations, including random inspections, in connection with the administration and enforcement of this chapter;
(2) shall enforce this chapter; and
(3) may hire investigators and other personnel necessary to carry out the purpose of this chapter.
(c) 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 independent contractor under section 14 of this chapter.
(d) The department 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. 18. (a) The department, the department of workforce development, the department of revenue, and the board shall cooperate under this chapter by sharing information concerning suspected failure to properly classify an independent contractor as an employee by a contractor, an agent of a contractor, or a subcontractor.
(b) Before January 1, 2011, the department, the department of workforce development, the department of revenue, and the board shall develop a joint computer system in order to share information. For purposes of IC 5-14-3-4, information exchanged under this section is confidential.
Sec. 19. (a) Whenever the department determines, after investigation, that a violation of this chapter has occurred, the department shall issue and cause to be served on the contractor or the subcontractor, by posting at the site in a location visible to the workers, if construction is still occurring, an order to cease and desist from further violation of this chapter. If construction has ceased, the notice shall be sent by first class mail to the business address of the contractor as shown in the records of the secretary of state. If a subcontractor has committed the violation, the department shall notify the contractor either at the job site or by first class mail sent to the business address of the contractor as shown in the records of the secretary of state, and to the subcontractor, either at the job site or by first class mail sent to the business address of the subcontractor as shown in the records of the secretary of state. An order issued under this section is a matter of public record.
(b) Upon determining that a contractor, an agent of a contractor, or a subcontractor has classified an employee as an independent contractor in violation of this chapter, the department shall notify:
(1) the department of workforce development, which shall investigate the contractor's compliance with laws under IC 22-4 and IC 22-4.1;
(2) the department of revenue, which shall investigate the contractor's compliance with laws under IC 6; and
(3) the board, which shall investigate the contractor's compliance with laws under IC 22-3.
fund established by section 24 of this chapter. A civil penalty
imposed under this section is a matter of public record.
Sec. 21. At the time of the imposition of the civil penalty under section 20(a) and 20(b) of this chapter, the department shall inform the contractor by written notice, sent by first class mail to the business address of the contractor as shown in the records of the secretary of state, that a further investigation by the department will be made thirty (30) business days after the initiation of the investigation. The notice also must inform the contractor that if further investigation reveals the continuing failure to properly classify employees, the department will take the action set forth in section 26(b) of this chapter, which will deny the contractor a contract for a public work project (as defined in IC 36-1-12-2), a state public works project under IC 4-13.6, or an Indiana department of transportation public works project under IC 8-23 for four (4) years after the posting of the name of the contractor on a list kept by the department and posted on the department's Internet web site.
Sec. 22. (a) A contractor, an agent of a contractor, or a subcontractor that receives:
(1) a cease and desist order;
(2) a civil penalty assessment; or
(3) both an order under subdivision (1) and a civil penalty under subdivision (2);
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 contesting the determination of the department. 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 or subcontractor 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 or subcontractor is no longer performing services at the place where the alleged violation occurred, at the contractor's or subcontractor's principal place of business in a conspicuous place where labor notices regularly are posted. Further, the contractor or subcontractor, when filing the petition, 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. If the contractor, agent of the
contractor, or subcontractor does not file a petition for review and
post a bond within the ten (10) business day period, the
department's determination is final.
(b) If the contractor, agent of the contractor, or subcontractor files a petition for review of an action under section 26(b) of this chapter within ten (10) business days after notification of the proposed action by the department, the commissioner shall set a hearing on the proposed action. 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.
Sec. 23. If a contractor or subcontractor does not:
(1) file a written petition for review within ten (10) business days after receipt of the determination in accordance with IC 4-21.5-3-2 as required by section 22(a) of this chapter; or
(2) prevail in an appeal under IC 4-21.5-3-2;
the department may additionally order the contractor or subcontractor to cease work on all projects where the contractor or subcontractor has been found to have misclassified employees under this chapter. This order must remain in effect until the department determines that the contractor or subcontractor has remedied fully the misclassification, including making all employees whole for the misclassification.
Sec. 24. (a) The employee classification fund is established to provide funds for:
(1) administering this chapter;
(2) investigating contractors, agents of contractors, and subcontractors;
(3) determining whether there is proof to substantiate allegations of failure to properly classify employees; and
(4) meeting 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.
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.
(c) Retaliation through discharge or in any other manner subjects a contractor, an agent of a contractor, or a subcontractor to a private civil action brought by the aggrieved person.
(d) In a civil action for unlawful retaliation, the court may award:
(1) all legal or equitable relief, or both, as appropriate; and
(2) attorney's fees and costs.
(e) The right of an aggrieved person to bring a civil action under this section terminates three (3) years after the final date of performing services for the contractor or subcontractor by the affected employee. However, the period of limitation established by this subsection is tolled if the contractor, an agent of the contractor, or a subcontractor has deterred a person's exercise of rights under this chapter.
Sec. 28. A person may not waive any provision of this chapter.
Sec. 29. All statutory provisions and penalties existing before July 1, 2010, including fines, that apply to the improper classification of employees as independent contractors remain in effect after June 30, 2010.
Sec. 30. 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 a proceeding other than a proceeding under this chapter.
allegation of improper classification of an employee as an
independent contractor in violation of IC 22-2-15.
(c) If the worker's compensation board, during its investigation, determines that a contractor or subcontractor has failed to properly classify an independent contractor as an employee on a construction project and the contractor or subcontractor fully conforms to the decision of the worker's compensation board, either by:
(1) properly classifying all employees found to be improperly classified as an independent contractor within seven (7) business days after notification by the worker's compensation board of the determination; or
(2) ceasing all work on the construction project within seven (7) business days after notification;
the contractor or subcontractor shall be found to be in conformance with the decision of the the worker's compensation board, and no fee or penalty is due.
(d) If the worker's compensation board discovers, more than seven (7) business days after notification by the worker's compensation board of the determination under subsection (c), that the contractor or subcontractor continues to improperly classify an employee as an independent contractor, the contractor or subcontractor is subject to a civil penalty of five hundred dollars ($500) per improperly classified employee, to be assessed and collected by the board.
(e) Civil penalties assessed and collected under this section shall be deposited in the worker's compensation supplemental administrative fund established by section 6 of this chapter.