Employment
& Labor Group
Jerald J. Oppel, Chair
Sharon A. Snyder
Harold G. Belkowitz
Neil E. Duke
Carla N. Murphy
Stacy Bekman Radz
Ian I. Friedman
AUGUST 14, 2009
Maryland Employers Improperly Classifying Workers as Independent Contractors Do So at Their Peril
On July 14, 2009, Maryland Governor Martin O'Malley signed an Executive Order establishing The Joint Employment Task Force on Workplace Fraud (Download PDF). Maryland businesses which fail to properly classify individuals as employees as opposed to independent contractors will face large fines, penalties and assessments by treating an individual as an independent contractor when that individual should be treated as an employee. Employers may have heard about recently enacted language focused on the construction and landscaping business, but this Executive Order establishes a Task Force that may affect all Maryland businesses.
This Executive Order comes on the heels of the passage of Maryland Senate Bill 909, the Workplace Fraud Act of 2009, which will take effect on October 1, 2009, and will affect construction and landscaping businesses operating in Maryland. The Executive Order on The Joint Employment Task Force on Workplace Fraud seeks to coordinate and expand in areas other than construction or landscaping. One of its goals is "to develop strategies for systematic investigations of workplace fraud within those industries in which misclassification is most common," and "to consult with representatives of business, organized labor and other agencies to improve and expand upon the operation and effectiveness of the Task Force and its members." This new executive order is a "preview of coming attractions" for Maryland employers other than construction and landscaping contractors. Any Maryland employer utilizing "independent contractors" needs to carefully evaluate its practices because if the newly created law dealing with construction and landscaping contractors expands into other areas at the recommendation of the Joint Employment Task Force on Workplace Fraud, it is conceivable and even likely that the draconian logic of the newly enacted workplace fraud law will be expanded to other types of businesses.
The new Task Force operates under the auspices of the Department of Labor, Licensing and Regulation. It includes the Secretary of Labor, Licensing and Regulation or the Secretary's designee; Attorney General or the Attorney General's designee; Comptroller or the Comptroller's designee; Chair of the Workers' Compensation Commission or the Chair's designee; Insurance Commissioner or the Commissioner's designee; Commissioner of Labor and Industry or the Commissioner's designee; and Assistant Secretary for the Division of Unemployment Insurance or the Assistant Secretary's designee.
It is intended to ensure that business do not shirk their obligations under the laws governing the minimum wage, overtime, prevailing wage, living wage, unemployment insurance, workers' compensation insurance, temporary disability insurance, wage payment, and income taxes. There is no limitation in the Task Force's authority based on the size or nature of the business. The Task Force will report annually on its efforts, which include the use of resources to:
- facilitate among Task Force members the timely sharing of information related to suspected workplace fraud to the maximum extent permitted by law;
- pool, focus, and target investigative and enforcement resources;
- assess existing methods and best practices, in both Maryland and other jurisdictions, with respect to workplace fraud prevention and enforcement, and to recommend that participating agencies adopt appropriate measures to improve their prevention and enforcement efforts;
- develop strategies for systematic investigations of workplace fraud within those industries in which misclassification is most common;
- identify and facilitate the filing of complaints against potential violators, including soliciting referrals and other relevant information from the public through the development of an education and outreach campaign;
- identify significant cases of workplace fraud which should be investigated and addressed collaboratively, and to form joint enforcement teams to utilize the collective investigative and enforcement capabilities of the Task Force members;
- establish protocols, consistent with applicable law, through which individual Task Force agencies investigating workplace fraud matters under their own statutory or administrative schemes will refer appropriate matters to other agencies for assessment of potential liability under all relevant statutory or administrative schemes;
- establish referral procedures and solicit the cooperation and participation of local state's attorneys and other relevant agencies, where appropriate;
- coordinate efforts with federal agencies;
- work cooperatively with business, labor, and community groups interested in reducing workplace fraud by: (a) developing ways to prevent workplace fraud through effective outreach, including notices and educational materials; and (b) enhancing mechanisms to identify and report workplace fraud;
- increase public awareness that employee misclassification is illegal and causes harm;
- work cooperatively with federal, State, and local social service agencies to provide assistance to individuals who have been harmed by workplace fraud; and
- consult with representatives of business, organized labor, and other agencies to improve and expand the operation and effectiveness of the Task Force and its members.
A more detailed article will follow; however, in the meantime, Maryland businesses classifying workers as independent contractors need to analyze very carefully the validity of such classification.
For questions or concerns regarding how these changes may affect your company, please contact Jerald J. Oppel (jjoppel@ober.com / 410-347-7338) or your Ober|Kaler attorney.
Employment Line Newsletter | Employment & Labor Group | www.ober.com
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