Bill Summary – FastDemocracy

HB 986
                      Department of Legislative Services
                              Maryland General Assembly
                                    2021 Session
                            FISCAL AND POLICY NOTE
                                   First Reader
House Bill 986                  (Delegate Harrison)
Economic Matters
    Labor and Employment - Workplace Fraud Act - Rebuttable Presumption of the
                       Employer-Employee Relationship
This bill allows an employer to overcome the presumption of an employer-employee
relationship under the State’s Workplace Fraud Act and establish that an individual
performing services is an independent contractor on a showing that the individual meets
15 specified criteria.
                                    Fiscal Summary
State Effect: The bill is not anticipated to materially affect State operations or finances.
Local Effect: The bill does not directly affect local government operations or finances.
Small Business Effect: Potential meaningful.
                                         Analysis
Bill Summary: An employer may overcome the presumption of an employer-employee
relationship and establish that an individual performing services is an independent
contractor on a showing that the individual:
      may comply with a work order in a method of the individual’s choosing;
      is not required to attend training sessions offered by the employer;
      provides services to the employer that are not integrated into the regular operations
       of the employer’s business;
      is not required to perform services personally;
      hires and supervises others under a contract under which the individual agrees to
       provide material and labor and is responsible only for a result;
      does not necessarily have a continuing relationship with a person for whom work is
       performed;
      is free to work when and for whom the individual chooses;
      may accomplish the work assigned in a place other than the employer’s workplace;
      is not required to file regular status reports;
      is paid according to when a particular job is completed rather than by an hourly,
       weekly, or monthly schedule;
      determines the price of the service to be performed;
      provides equipment necessary to complete work;
      may realize a profit or suffer a loss as a result of services rendered;
      is free to work for more than one firm at a time; and
      makes services available to the general public.
Current Law: Chapter 188 of 2009 (the Workplace Fraud Act) established, for the
purpose of enforcement only, a presumption that work performed by an individual paid by
an employer creates an employer-employee relationship, subject to specified exemptions.
It prohibits construction companies and landscaping businesses from failing to properly
classify an individual as an employee and establishes investigation procedures and
penalties for noncompliance.
The “ABC test” incorporated in the Workplace Fraud Act is used by the Maryland
Department of Labor (MDL) to establish whether an employer-employee relationship
exists for the purpose of determining whether an employee has been misclassified under
the Act. While only used to detect workplace fraud in the specified industries, MDL is
required to use the ABC test in determining whether an individual is an employee in any
industry for the purpose of determining whether the employer should pay unemployment
insurance for the individual. The ABC test has three components, all of which must be met
to establish that an individual is an independent contractor and not an employee:
A.     the individual is free from control and direction over his or her performance both in
       fact and under the contract (Alone);
B.     the individual customarily is engaged in an independent business or occupation
       (Business); and
C.     the work performed is outside the usual course of business, or outside the place of
       business, of the person for whom work is performed (Control).
HB 986/ Page 2
The Act distinguishes between an employer who improperly misclassifies an employee and
an employer who knowingly misclassifies an employee, and penalties are more severe for
an employer who is guilty of knowingly misclassifying an employee.
Small Business Effect: Although the criteria established by the bill are substantively
similar to the questions generally asked by State and federal investigators when
determining whether an employer-employee relationship exists, MDL advises that all
15 criteria are not necessarily required to be met. Thus, MDL advises that small businesses
may find having to meet all 15 criteria to be difficult, impractical, or impossible.
                               Additional Information
Prior Introductions: None.
Designated Cross File: SB 806 (Senator Peters) - Finance.
Information Source(s): Maryland Department of Labor; Department of Legislative
Services
Fiscal Note History:      First Reader - March 3, 2021
an/mcr
Analysis by: Richard L. Duncan                         Direct Inquiries to:
                                                       (410) 946-5510
                                                       (301) 970-5510
HB 986/ Page 3
Statutes affected: 
Text - First - Labor and Employment - Workplace Fraud Act - Rebuttable Presumption of the Employer-Employee Relationship: 3-903 Labor and Employment, 3-903.1 Labor and Employment, 3-903 Labor and Employment