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Workplace Fraud Act of 2009

By January 26, 2018 Personal Insurance

In meeting with many of our clients this year many of our clients have not been familiar with the Workplace Fraud Act of 2009. Many businesses use subcontractors so it is imperative that you understand the law.

Background

1. The SB 909 was put in force to deal with misclassification issues. SB 909 amends the Labor and Employment Article to specifically prohibit employers from falsely classifying employees as independent contractors. Substantial civil penalties against the employer are possible with fines up to $20,000. This bill also creates a presumption in the workers’ compensation law that an individual in the service of an employer is an employee and not an independent contractor. As a result, the burden will now be on the employer to prove that a worker is in fact, an independent contractor (free of the employer’s control, paid other than hourly, not provided tools or materials, etc). This amendment to the law is effective October 1, 2009.

2. Investigations: Prohibiting specified employers from failing to properly classify individuals who perform work for remuneration paid by the employer; authorizing the Commissioner of Labor and Industry to initiate an investigation under specified circumstances to determine whether specified violations occurred; requiring the Commissioner to enforce specified provisions; establishing the method of determining whether an employer-employee relationship exists for purposes of proper classification under specified circumstances; etc.

Who is affected:

Construction Services defined as: building; reconstructing; improving; enlarging; painting; altering; maintaining; and repairing.

Landscaping Services defined as: garden maintenance and planting; lawn care including fertilizing, mowing, mulching, seeding, and spraying; Seeding and mowing of highway strips; sod laying; turf installation, except artificial; ornamental bush planting, pruning, bracing, spraying, and removal and ornamental tree planting, pruning, bracing, spraying, and removal.

Who is exempt:

“exempt persons” – and defines them as anyone who:

  • Performs services in a personal capacity and employs no one else except his or her spouse, child or parent.
  • Performs services free from the direction and control of the company with which they
  • contract. The contracting employee does have the right to “specify the desired result.”
  • Operates a business that “is considered inseparable from the individual for the
  • purpose of taxes, profits and liabilities.”- they would be considered an employee.

Length of time to retain: All required information is required to be retained for three (3) years.

CNR Insurance’s suggested requirements for handling subcontractors.

  • Name owner (contractor) as additional insured. Prefer CG2010 over other types of operations additional insured. Blanket forms or CG2033 usually do not name you on the subcontractor declarations pages. Prefer to also provide CG2037 in order to cover the completed operations. (Note: general contractor should never furnish additional insured’s to sub)
  • Prefer to have waiver of subrogation- CG2404 liability, wc000313 workers compensation.
  • Optional: primary and non-contributory wording in favor of your insured
  • If the subcontractor is a sole proprietor or a business that is not required by law to carry workers compensation insurance, it is in the best interest of the hiring contractor to force a workers compensation certificate of insurance from them, even if it is a certificate only policy, in order to ensure they cannot claim benefits on hiring contractors policy.

What is required to be on file: Name, address, occupation, and classification of each employee or independent contractor; Rate of pay of each employee or method of payment for the independent contractor; Amount that is paid each pay period to each employee or if applicable independent contractor; Hours that each employee or independent contractor works each day and each workweek; For all individuals who are not classified as employees, evidence that each individual is an exempt person or an independent contractor or its employee; and the Notice to Independent Contractors and Exempt Persons form should be kept on file.(MD Notice to Independent Contractors)

Independent Contractor or Employee? Click Here

We hope this information is helpful and please call us with any questions. 410-897-9890.