The Workers’ Compensation Act requires a contractor/employer to stand in reserve and provide workers’ compensation insurance for subcontractors and their employees, if that subcontractor does not have insurance. Originally the Workers’ Compensation Act set enacted this requirement in order to protect workers. The legislature believed that making the contractor responsible for workers’ compensation benefits when its subcontractor was uninsured, would force the hiring contractor to make sure that the subcontractor it hired had insurance. However, that is not what happened.
Contractors shortly learned that the law does not require the contractor to provide workers’ compensation insurance to a subcontractor or its workers if they were an “independent contractor’. So, in order to avoid paying higher workers’ compensation insurance, contractors are calling all subcontractors “independent contractors” even when the subcontractor is not truly an independent contractor. The reality of this is that the injured worker suffers the consequences by being denied a workers’ compensation benefits because of the, sometimes intentional, mis-classification of the subcontractor.
In an effort to avoid the above scenario, on February 10, 2011 the Construction Workplace Misclassification Act took effect. The purpose of this Act is to prevent employers from classifying their subcontractors as “independent contractors” in order to avoid paying workers compensation benefits. According to this Act, for the purposes of Workers compensation you are considered an “independent contractor” only if the following is met:
- The individual has a written contract to perform such services.
- The individual is free from control or direction over performance of such services goes under the contract of service and in fact.
- As to such services the individual is customarily engaged in an independently established trade, occupation, profession or business.
Under this Act, it doesn’t matter if federal/state income taxes are being withheld or if unemployment compensation or workers’ compensation premiums are being paid. If a subcontractor meets the above criteria, they are considered an independent contractor.
The Act also goes to provide a deterrent for those who improperly classify a subcontractor as “independent”. If an officer or agent of the employer violates this Act, the employer can face criminal penalties including a misdemeanor of the third degree for a first offense, a misdemeanor of the second degree for a second or offense and/or be ordered to pay a fine of up to $1,000.
If you feel that you have been denied workers compensation benefits because a company you worked for classified you as an independent contractor, you can file a complaint online using the “Construction Workplace Misclassification Complaint Form”. This form can be found on the Pennsylvania Department of Labor & Industry website form number LLC-72. Should you have any questions, or feel you have been denied benefits by being classified an “independent contractor” rather than an employee, please call us at 267-907-9600.