Employee Misclassification

This week, Delegate Jeannie Haddaway-Riccio and other members of the House Economic Matters Committee held hearings on three bills related to employee misclassification including House Bill 819, which was introduced by the O’Malley Administration. Over ninety witnesses came to testify on the proposed changes.

House Bill 819 establishes a presumption that anyone paid for work performed is an employee. The legislation specifically targets the construction, landscaping and package-delivery industries which traditionally operate under a contractor-subcontractor relationship. The penalties for improperly misclassifying include payment of restitution and a $3,000 fine per employee. An employer that knowingly misclassifies an employee is subject to a penalty of up to $5,000 per employee. An individual who assists, advises, or otherwise facilitates an employer to misclassify employees is subject to a civil penalty of up to $20,000.

Alternatively, House Bill 649 would bring Maryland law in line with the Federal IRS law which uses a 20 factor test to determine whether a worker is an employee or not. Many Maryland businesses prefer this legislation because currently, they are subject to one set of standards for the State of Maryland and a different set of standards for the federal government.

House Bill 1070 establishes penalties for knowingly and willfully misclassifying an employee as an independent contractor and authorizes the Commissioner of Labor and Industry to investigate suspected violations.

The Committee is expected to consider all three bills over the next few weeks and may work toward a compromise between the three bills.