In the past, many employers have attempted to classify employees as independent contractors in order to avoid providing workers compensation benefits. The law now provides protection to employees from being misclassified as independent contractors.
Misclassification of employees as independent contractors is illegal for commercial and residential Construction in Pennsylvania. No individual may be classified as an independent contractor unless the individual:
- Has a written contract to perform construction services with the business or person;
- Is free from control or direction over the performance of these services, and
- Is customarily engaged in an independently established trade, occupation, profession or business.
An individual is “customarily engaged in an independently established trade, occupation, profession or business” only if:
- The individual possesses the essential tools to perform the services independent of the business for which the services are performed.
- The individual must realize a profit or suffer a loss for the project.
- The individual must have a proprietary interest in their business.
- The individual must have a business location separate from the business or person for whom the services are being performed.
- The individual independently performed the same services for another person, or was available and able to independently perform these se3rvices for another person and represented that these services could be independently performed for another person.
- The individual must maintain liability insurance of at least $50,000 during the term of the contract.
The following is also prohibited:
- An employer may not retaliate against any person who exercises rights under the law, including the filing of a complaint or informing another about an employer’s noncompliance with the Act.
- An employer may not require or demand that an individual enter into an agreement or sign a document which results in the improper classification of that individual as an independent contractor.
- An employer may not intentionally contract with another employer knowing that the employer intends to misclassify employees.