Bill Summary – FastDemocracy

PRINTER'S NO.   3309
                    THE GENERAL ASSEMBLY OF PENNSYLVANIA
                        HOUSE BILL
                        No. 2411
                                                Session of
                                                  2024
     INTRODUCED BY PISCIOTTANO, HILL-EVANS, ABNEY, McNEILL, PROBST,
        N. NELSON, HOWARD, BOYD, KINKEAD, VENKAT, KINSEY, GIRAL,
        D. MILLER, POWELL, HADDOCK, T. DAVIS, MALAGARI, PIELLI,
        DELLOSO, OTTEN, SCHLOSSBERG, NEILSON, SANCHEZ, MERSKI,
        PARKER, ROZZI, O'MARA AND DALEY, JUNE 12, 2024
     REFERRED TO COMMITTEE ON LABOR AND INDUSTRY, JUNE 12, 2024
                                       AN ACT
 Providing for criteria for independent contractors and for
    powers and duties of the Department of Labor and Industry and
    the Secretary of Labor and Industry; and imposing penalties.
                            TABLE OF CONTENTS
 Section 1.    Short title.
 Section 2.    Definitions.
 Section 3.    Independent contractors.
 Section 4.    Improper classification of employees.
 Section 5.    Criminal penalties.
 Section 6.    Private right of action.
 Section 7.    Administrative penalties.
 Section 8.    Stop-work orders.
 Section 9.    Procedure.
 Section 10.    Certain agreements prohibited.
 Section 11.    Retaliation for action prohibited.
 Section 12.    Availability of information.
 Section 13.    Use of penalty funds and recovered fees and costs.
 Section 14.    Rules and regulations.
 Section 15.    Annual report required.
 Section 16.    Severability.
 Section 17.    Construction of law.
 Section 18.    Funding.
 Section 19.    Effective date.
    The General Assembly of the Commonwealth of Pennsylvania
 hereby enacts as follows:
 Section 1.    Short title.
    This act shall be known and may be cited as the Workplace
 Misclassification Act.
 Section 2.    Definitions.
    The following words and phrases when used in this act shall
 have the meanings given to them in this section unless the
 context clearly indicates otherwise:
    "Construction."    As defined in section 2 of the act of
 October 13, 2010 (P.L.506, No.72), known as the Construction
 Workplace Misclassification Act.
    "Debar."    As follows:
        (1)    Action taken by the secretary to prohibit a
    contractor, subcontractor or person from contracting with or
    participating in contracts for public work or providing
    services to any State or local government entity for a period
    of at least three years.
        (2)    The debarment shall include all divisions or other
    organizational elements of a contractor or subcontractor
    unless limited by its terms to specific divisions or
    organizational elements.
        (3)    The debarment may apply to affiliates or other
    persons associated with the contractor, subcontractor or
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    person if they are specifically named and given written
    notice of the debarment and an opportunity to appeal.
        (4)   The debarment shall apply to a successor entity. An
    entity shall be a successor entity if it:
              (i)    has one or more of the same principals or
        officers as the employer against whom the order was
        issued;
              (ii)    performs similar work within the same
        geographical area;
              (iii)    occupies the same premises;
              (iv)    shares the same telephone number or facsimile
        number;
              (v)    has the same email address or Internet website;
              (vi)     employs substantially the same workforce or
        administrative employees, or both;
              (vii)    utilizes the same tools, equipment or
        facilities;
              (viii)     employs or engages the services of any person
        or persons involved in the direction or control of the
        other; or
              (ix)    lists substantially the same work experience.
    "Department."      The Department of Labor and Industry of the
 Commonwealth.
    "Employee."      Either of the following:
        (1)   In relation to workers' compensation, the term shall
    have the meaning given to it in section 104 of the Workers'
    Compensation Act.
        (2)   In relation to unemployment compensation, the term
    shall have the meaning given to it in section 4(i) of the
    Unemployment Compensation Law.
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    "Employer."     Either of the following:
          (1)   In relation to workers' compensation, the term shall
    have the meaning given to it in section 103 of the Workers'
    Compensation Act.
          (2)   In relation to unemployment compensation, the term
    shall have the meaning given to it in section 4(j) of the
    Unemployment Compensation Law.
    "Public work."     As defined in section 2(5) of the act of
 August 15, 1961 (P.L.987, No.442), known as the Pennsylvania
 Prevailing Wage Act.
    "Secretary."     The Secretary of Labor and Industry of the
 Commonwealth or the secretary's authorized representative.
    "Unemployment Compensation Law."       The act of December 5, 1936
 (2nd Sp.Sess., 1937 P.L.2897, No.1), known as the Unemployment
 Compensation Law.
    "Workers' Compensation Act."     The act of June 2, 1915
 (P.L.736, No.338), known as the Workers' Compensation Act.
 Section 3.     Independent contractors.
    (a)   General rule.--For purposes of workers' compensation,
 unemployment compensation and improper classification of
 employees, an individual who performs services in any industry
 other than construction for remuneration is an independent
 contractor only if:
          (1)   The individual has a written contract that is
    project-specific and contains a particular scope of work and
    definitive time period to perform the services.
          (2)   The individual is free from control or direction
    over performance of services both under the contract of
    service and in fact.
          (3)   As to services, the individual is customarily
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       engaged in an independently established trade, occupation,
       profession or business.
       (b)   Criteria.--An individual is customarily engaged in an
 independently established trade, occupation, profession or
 business with respect to services the individual performs only
 if:
             (1)   The individual possesses the essential tools,
       equipment and other assets necessary to perform the services
       independent of the person for whom the services are
       performed.
             (2)   The individual's arrangement with the person for
       whom the services are performed is such that the individual
       shall realize a profit or suffer a loss as a result of
       performing the services.
             (3)   The individual performs the services through a
       business in which the individual has a proprietary interest.
             (4)   The individual maintains a business location that is
       separate from the location of the person for whom the
       services are being performed.
             (5)   The individual:
                   (i)    previously performed the same or similar
             services for another person in accordance with paragraphs
             (1), (2), (3) and (4) while free from direction or
             control over performance of the services both under the
             contract of service and in fact; or
                   (ii)    holds themselves out to other persons as
             available and able and is available and able to perform
             the same or similar services in accordance with
             paragraphs (1), (2), (3) and (4) while free from
             direction or control over performance of the services.
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    (c)   Factors not to be considered.--The failure to withhold
 Federal or State income taxes or pay unemployment compensation
 contributions or workers' compensation premiums with respect to
 an individual's remuneration shall not be considered in
 determining whether the individual is an independent contractor
 for purposes of the Workers' Compensation Act or the
 Unemployment Compensation Law.
    (d)   Workers' compensation.--
          (1)   An individual who is an independent contractor as
    determined under this section is not an employee for purposes
    of the Workers' Compensation Act. For purposes of this
    section, each employment relationship shall be considered
    separately.
          (2)   Nothing in this act shall be construed to affect
    section 321(2) of the Workers' Compensation Act.
    (e)   Unemployment compensation.--
          (1)   For purposes of section 4(l)(2)(B) of the
    Unemployment Compensation Law, an individual is customarily
    engaged in an independently established trade, occupation,
    profession or business only if the criteria in subsection (b)
    are satisfied.
          (2)   Except as provided in paragraph (1), nothing in this
    act shall be construed to affect any exclusion from
    employment as defined in the Unemployment Compensation Law.
 Section 4.     Improper classification of employees.
    (a)   Violation.--An employer or officer or agent of an
 employer shall be in violation of this act and shall be subject
 to the penalties, remedies and actions contained in this act if
 the employer, officer or agent:
          (1)   fails to properly classify an individual as an
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    employee for purposes of the Workers' Compensation Act and
    fails to provide the coverage required under the Workers'
    Compensation Act; or
          (2)   fails to properly classify an individual as an
    employee for purposes of the Unemployment Compensation Law
    and fails to pay contributions, reimbursements or other
    amounts required to be paid under the Unemployment
    Compensation Law.
    (b)   Separate offenses.--Each individual who is not properly
 classified as an employee shall be the basis of a separate
 violation of this section.
    (c)   Order to show cause.--
          (1)   If the secretary receives information indicating
    that a person has violated this act, the secretary may
    investigate the matter and issue an order to show cause why
    the person should not be found in violation of this act.
          (2)   A person served with an order to show cause shall
    have a period of 20 days from the date the order is served to
    file an answer in writing.
          (3)   If the person fails to file a timely and adequate
    answer to the order to show cause, the secretary may,
    following notice and hearing, do any of the following:
                (i)    petition a court of competent jurisdiction to
          issue a stop-work order as provided in section 7; or
                (ii)    immediately assess penalties as provided in
          section 6.
    (d)   Enforcement.--The following shall apply:
          (1)   If, subsequent to issuing an order to show cause
    under subsection (c), the secretary finds that an employer
    has failed to properly classify an individual as an employee
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    for the purposes of this act, the secretary shall impose
    administrative penalties under section 6.
          (2)   In addition to imposing penalties under paragraph
    (1), the secretary may refer the matter to the Attorney
    General for criminal investigation. The secretary shall make
    a referral if the employer has previously been found in
    violation of this act in another matter. The Attorney General
    has jurisdiction under section 5 to initiate an investigation
    or prosecution of criminal violations of this act regardless
    of whether a referral has been made.
    (e)   Acting in concert with other parties.--A party that does
 not meet the definition of "employer" in section 2, but which
 intentionally contracts or renews a contract with an employer to
 supply labor to an employer knowing the employer will
 misclassify the supplied employees in violation of this act,
 shall be subject to the same penalties, remedies or other
 actions as the employer found to be in violation of this act.
    (f)   Defense.--It shall be a defense to an alleged violation
 of this section if the person for whom the services are
 performed in good faith believed that the individual who
 performed the services qualified as an independent contractor at
 the time the services were performed.
 Section 5.     Criminal penalties.
    (a)   Grading.--An employer or officer or agent of an employer
 that intentionally violates section 4(a) commits:
          (1)   A misdemeanor of the first degree if the employer
    has no prior offense under section 4(a).
          (2)   A felony of the third degree if the employer has one
    or more prior offenses under section 4(a).
    (b)   Summary offense.--An employer or officer or agent of an
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 employer that negligently fails to properly classify an
 individual as an employee under section 4(a) commits a summary
 offense and shall, upon conviction, be sentenced to pay a fine
 of not more than $1,000. Evidence of a prior conviction under
 this subsection shall be admissible as evidence of intent under
 subsection (a).
    (c)   Concurrent jurisdiction.--
          (1)   The Attorney General shall have concurrent
    prosecutorial jurisdiction with the district attorney of the
    appropriate county for violations under this section and any
    offense arising out of the activity prohibited by this
    section.
          (2)   No person charged with a violation of this section
    by the Attorney General shall have standing to challenge the
    authority of the Attorney General to prosecute the case, and
    if a challenge is made, the challenge shall be dismissed and
    no relief shall be available in the courts of this
    Commonwealth to the person making the challenge.
    (d)   Definitions.--As used in this section, the following
 words and phrases shall have the meanings given to them in this
 subsection unless the context clearly indicates otherwise:
    "Prior offense."     A conviction of a violation of section 4 if
 the judgment of sentence was imposed before the defendant was
 sentenced for a separate violation of section 4.
 Section 6.     Private right of action.
    (a)   General rule.--An employee who has been misclassified in
 violation of this act, or has been discharged, been threatened
 or has otherwise suffered retaliation, discrimination or other
 adverse action as a result of participating in an investigation
 or reporting a violation of this act, may bring a private right
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 of action in a court of common pleas in accordance with
 established civil procedures of this Commonwealth.
    (b)   Time.--An action under this section must be brought
 within three years from the date that the employee knew of the
 violation, retaliation or discrimination.
    (c)   Relief.--If an employee prevails in an action commenced
 under this section, the employee shall be entitled to the
 following relief:
          (1)   Reinstatement of the employee without a loss in
    seniority status, if applicable.
          (2)   Restitution equal to three times the amount of the
    employee's wages and fringe benefits calculated from the date
    of the violation, retaliation or discrimination.
          (3)   Reasonable attorney fees and costs of the action.
          (4)   Other legal and equitable relief the court deems
    appropriate to make the employee whole.
 Section 7.     Administrative penalties.
    (a)   General rule.--When the secretary finds that a person
 has violated this act, the secretary:
          (1)   Shall assess and collect civil penalties of not more
    than $1,000 for the first violation and not more than $2,500
    for each subsequent violation.
          (2)   May order a financial audit or tax audit of any
    relevant prospective records of the person.
    (b)   Factors to be considered.--When determining the amount
 of the penalty to be imposed, the secretary shall consider
 factors, including, but not limited to:
          (1)   The history of previous violations by the employer.
          (2)   The seriousness of the violation.
          (3)   The good faith of the employer.
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          (4)   The size of the employer's business.
    (c)   Intentional violation.--The following shall apply:
          (1)   If the secretary determines that a violation of this
    act was intentional, the secretary shall debar, for a period
    of at least three years, a contractor, subcontractor or
    person from