Citations Affected: IC 6-3-7-5; IC 6-8.1; IC 22-1-1; IC 22-2-15;
IC 22-3; IC 22-4.1-4; IC 34-11-2-13; IC 36-1-12-1.
Synopsis: Improper classification of employees. Provides that an
individual performing services for a contractor or subcontractor on a
public work project is considered to be an employee of the contractor
or subcontractor, with certain exceptions. Provides for investigations
of the employment relationship between an individual and a contractor
or subcontractor by the department of labor, for certain procedures to
be followed in investigations, and for various civil penalties to be
assessed by the department of labor for the failure to properly classify
individuals as employees. Provides for the sharing of information
concerning the classification of individuals as independent contractors
among the department of labor, the department of state revenue, the
department of workforce development, and the worker's compensation
board of Indiana. Provides that certain information pertaining to
employee classification shared among the state agencies is confidential
and may not be published or open to public inspection. Provides for
criminal penalties for the improper classification of employees as
independent contractors, and prohibits the awarding of contracts for
public work projects to a contractor or subcontractor for four years after
the contractor or subcontractor is found to have committed certain
recurring improper classifications.
Effective: July 1, 2009.
January 8, 2009, read first time and referred to Committee on Pensions and Labor.
A BILL FOR AN ACT to amend the Indiana Code concerning labor
and safety.
information:
(1) The independent contractor's name, trade name, address, and
telephone number.
(2) The independent contractor's federal identification number or
Social Security number.
(3) The name and:
(A) Social Security number;
(B) federal employer identification number (FEIN); or
(C) taxpayer identification number (TIN);
of each person or entity with whom the independent contractor
has contracted.
(e) Along with the statement required in subsection (d), an
independent contractor shall file annually with the department
documentation in support of independent contractor status before being
granted a certificate of exemption. The independent contractor must
obtain clearance from the department of state revenue before issuance
of the certificate.
(f) An independent contractor shall pay a filing fee of five dollars
($5) with the statement required in subsection (d). The fees collected
under this subsection shall be deposited into a special account in the
state general fund known as the independent contractor information
account. Money in the independent contractor information account is
annually appropriated to the department for its use in carrying out the
purposes of this section.
(g) The department shall keep each statement and supporting
documentation received under this section on file and on request may
verify that a certificate of exemption is on file.
(h) The certificate of exemption required by this section must be on
a form prescribed and provided by the department. A certificate issued
under this section is valid for one (1) year. The department shall
maintain the original certificate on file.
(i) A certificate of exemption must certify the following
information:
(1) That the independent contractor has worker's compensation
coverage for the independent contractor's employees in
accordance with IC 22-3-2 through IC 22-3-7.
(2) That the independent contractor desires to be exempt from
being able to recover under the worker's compensation policy or
self-insurance of a person for whom the independent contractor
will perform work only as an independent contractor.
(j) The department shall provide the certificate of exemption to the
person requesting it not less than seven (7) business days after
verifying the accuracy of the supporting documentation. To be given
effect, a certificate of exemption must be filed with the worker's
compensation board of Indiana in accordance with IC 22-3-2-14.5(f)
and IC 22-3-7-34.5(g).
(k) Not more than thirty (30) days after the department receives an
independent contractor's statement and supporting documentation and
issues a certificate of exemption, the department shall provide the
independent contractor with an explanation of the department's tax
treatment of independent contractors and the duty of the independent
contractor to remit any taxes owed.
(l) The information received from an independent contractor's
statement and supporting documentation is to be treated as confidential
by the department and is to be used solely for the purposes of this
section.
(m) If the department determines during an investigation that
a contractor or subcontractor has failed to properly classify as an
employee an independent contractor on a public work (as defined
in IC 36-1-12-2), and the contractor or subcontractor fully
conforms to the departmental decision, either by:
(1) properly classifying all employees found to be misclassified
as an independent contractor not later than seven (7) business
days after notification of the determination by the
department; or
(2) ceasing all work on the public work project not later than
seven (7) business days after the notification;
the contractor or subcontractor shall be found to be in
conformance with the department's decision, and no fee or penalty
becomes due. In addition, the department shall revoke the
certificate of exemption provided under subsection (j) to the
employee who has not been properly classified. The filing fee paid
under subsection (f) shall not be returned to the individual who had
claimed to be an independent contractor.
(n) A contractor or subcontractor who continues to properly
classify an employee as an independent contractor on a public
work project more than seven (7) business days after notification
by the department of the determination of the failure to properly
classify under subsection (m) is subject to a civil penalty of five
hundred dollars ($500) per employee to be paid to the department.
The penalties collected under this subsection shall be deposited into
the special account in the state general fund established under
subsection (f) and known as the independent contractor
information account. IC 6-8.1-3-12 applies to the investigation and
IC 6-8.1-5-1 applies to the assessment of tax due concerning the
determination of the failure to properly classify an employee under
this section.
(o) If a contractor or a subcontractor has conformed to the
department's decision under subsection (m) regarding the failure
to properly classify an employee of the contractor or
subcontractor, and upon further investigation the contractor or
subcontractor is found to be in direct disregard of the
department's decision in an attempt to deceive the department, the
contractor or subcontractor is subject immediately to double the
civil penalty that the contractor or subcontractor would otherwise
be subject to under subsection (n) per employee who has failed to
have been properly classified.
(m) (p) A contractor or a subcontractor who knowingly or
intentionally causes or assists employees, including temporary
employees, to file a false statement and supporting documentation of
independent contractor status commits a Class D felony.
(q) If an interested party (as defined in IC 22-2-15-11) is found
by the department to have requested four (4) investigations
concerning the alleged failure to properly classify an independent
contractor as an employee by the department within a period of
one (1) year, whether the interested party:
(1) requested four (4) investigations of the same contractor or
subcontractor; or
(2) requested four (4) investigations of different contractors
or subcontractors;
and if the department finds all the requests for investigations to
have been groundless, the interested party shall be assessed a civil
penalty of five hundred dollars ($500) per requested investigation
by the department. A civil penalty assessed and paid under this
subsection shall be deposited in the independent contractor
information account established under subsection (f).
classification by a contractor (as defined in IC 22-2-15-7) of an
employee as an independent contractor (as defined in
IC 22-3-6-1(b)(7) or IC 22-3-7-9(b)(5)). For purposes of
IC 5-14-3-4, information shared under this section is confidential,
may not be published, and is not open to public inspection.
delinquent accounts, charges, fees, loans, taxes, or other indebtedness,
the fifteen percent (15%) fee shall be added to the amount due to the
state or claimant agency when the collection is made.
(i) Fees collected under subsection (h) shall be retained by the
department after the debt is collected for the claimant agency and are
appropriated to the department for use by the department in
administering this section.
(j) The department shall transfer any funds collected from a debtor
to the claimant agency within thirty (30) days after the end of the
month in which the funds were collected.
(k) When a claimant agency requests collection by the department,
the claimant agency shall provide the department with:
(1) the full name;
(2) the Social Security number or federal identification number,
or both;
(3) the last known mailing address; and
(4) additional information that the department may request;
concerning the debtor.
(l) The department shall establish a minimum amount that the
department will attempt to collect for the claimant agency.
(m) The commissioner shall report, not later than March 1 for the
previous calendar year, to the governor, the budget director, and the
legislative council concerning the implementation of the centralized
debt collection program, the number of debts, the dollar amounts of
debts collected, and an estimate of the future costs and benefits that
may be associated with the collection program. A report to the
legislative council under this subsection must be in an electronic
format under IC 5-14-6.
(n) The department may not assess a fee to a state agency or a
custodial parent for seeking a setoff to a state or federal income tax
refund for past due child support.
16 of this chapter.
(d) The department may:
(1) compel, by subpoena, the attendance and testimony of
witnesses and the production of books, payrolls, records,
papers, and other evidence in an investigation; and
(2) administer oaths to witnesses.
Sec. 20. (a) The department, the department of workforce
development, the department of revenue, and the board shall
cooperate under this chapter by sharing information concerning
suspected failure to properly classify an independent contractor as
an employee by a contractor, an agent of a contractor, or a
subcontractor.
(b) Before January 1, 2010, the department, the department of
workforce development, the department of revenue, and the board
shall develop a computerized system to investigate suspected
failure to properly classify an independent contractor as an
employee. For purposes of IC 5-14-3-4, information exchanged
under this section is confidential.
Sec. 21. (a) Whenever the department determines, after
investigation, that a violation of this chapter has occurred, the
department shall issue and cause to be served on the contractor or
the subcontractor, by posting at the site in a location visible to the
workers, if construction is still occurring, an order to cease and
desist from further violation of this chapter. If construction has
ceased, the notice shall be sent by first class mail to the business
address of the contractor as shown in the records of the secretary
of state. If a subcontractor has committed the violation, the
department shall notify the contractor either at the job site or by
first class mail sent to the business address of the contractor as
shown in the records of the secretary of state, and to the
subcontractor, either at the job site or by first class mail sent to the
business address of the subcontractor as shown in the records of
the secretary of state. An order issued under this section is a
matter of public record.
(b) Upon determining that a contractor, an agent of a
contractor, or a subcontractor has classified an employee as an
independent contractor in violation of this chapter, the department
shall notify:
(1) the department of workforce development, which shall
investigate the contractor's compliance with laws under
IC 22-4 and IC 22-4.1;
(2) the department of revenue, which shall investigate the
contractor's compliance with laws under IC 6; and
(3) the board, which shall investigate the contractor's
compliance with laws under IC 22-3.
The department of workforce development, the department of
revenue, and the board have the option to join in the investigation
with the department or to commence a separate investigation.
Sec. 22. (a) Seven (7) business days after the department serves
a cease and desist order upon a violator under section 21 of this
chapter, if services are continuing to be performed, the
investigating department shall return to the job site and continue
investigation of the classification of employees. If the department
concludes that the failure to properly classify employees is
continuing, the department shall impose a civil penalty of five
hundred dollars ($500) per improperly classified employee against
the contractor or on both the contractor and the subcontractor, if
a subcontractor has committed the violation. The civil penalty shall
be deposited in the employee classification fund established by
section 25 of this chapter. A civil penalty imposed under this
section is a matter of public record.
(b) Fifteen (15) days after the investigating department has
made an investigation at a job site under subsection (a), if services
are continuing to be performed, the department shall return to the
job site and continue the investigation of the proper classification
of employees. If the department concludes that improper
classification of employees is continuing to occur, the department
shall impose a civil penalty of:
(1) one thousand dollars ($1,000) per employee who has been
improperly classified against the contractor or against both
the contractor and the subcontractor, if the subcontractor has
committed the violation, in cases in which the contractor or
subcontractor has employed five (5) or fewer improperly
classified employees;
(2) two thousand five hundred dollars ($2,500) per employee
who has been improperly classified against the contractor or
against both the contractor and the subcontractor, if the
subcontractor has committed the violation, in cases in which
the contractor or subcontractor has employed six (6) to ten
(10) improperly classified employees; and
(3) five thousand dollars ($5,000) per employee who has been
improperly classified, against the contractor or against both
the subcontractor and contractor, if the subcontractor has
committed the violation, in cases in which the contractor or
subcontractor has employed more than ten (10) improperly
classified employees.
The civil penalty shall be deposited in the employee classification
fund established by section 25 of this chapter. A civil penalty
imposed under this section is a matter of public record.
Sec. 23. At the time of the imposition of the civil penalty under
section 22(a) and 22(b) of this chapter, the department shall inform
the contractor by written notice, sent by first class mail to the
business address of the contractor as shown in the records of the
secretary of state, that a further investigation by the department
will be made thirty (30) business days after the initiation of the
investigation. The notice also must inform the contractor that if
further investigation reveals the continuing failure to properly
classify employees, the department will take the action set forth in
section 28(b) of this chapter, which will deny the contractor a
contract for a public work project for four (4) years after the
posting of the name of the contractor on a list kept by the
department and posted on the web site of the department on the
Internet.
Sec. 24. (a) A contractor, an agent of a contractor, or a
subcontractor that receives:
(1) a cease and desist order;
(2) a civil penalty assessment; or
(3) both an order under subdivision (1) and a civil penalty
under subdivision (2);
from the department may seek a hearing on the determination by
filing a written petition for review with the department within ten
(10) business days after receipt of the determination and in
accordance with IC 4-21.5-3-2. The petition for review must
contain a statement of the basis for contesting the determination of
the department. The department shall mail a copy of the petition
for review to the complainant and to any interested party
designated on the complaint. The contractor or subcontractor shall
post a copy of the petition for review contemporaneously with the
filing of the petition at or near the place where the alleged violation
occurred or, if the contractor or subcontractor is no longer
performing services at the place where the alleged violation
occurred, at the contractor's or subcontractor's principal place of
business in a conspicuous place where labor notices regularly are
posted. Further, the contractor or subcontractor, when filing the
petition, shall post a bond in an amount sufficient to pay wages,
salary, employment benefits, or other compensation lost or denied
to the individual as determined by the department and civil
penalties assessed by the department. If the contractor, agent of the
contractor, or subcontractor does not file a petition for review and
post a bond within the ten (10) business day period, the
department's determination is final.
(b) If the contractor, agent of the contractor, or subcontractor
files a petition for review of an action under section 28(b) of this
chapter within ten (10) business days after notification of the
proposed action by the department, the commissioner shall set a
hearing on the proposed action. The hearing must take place not
more than forty-five (45) calendar days after the receipt of the
request for the hearing by the department. The hearing must be
held in accordance with IC 4-21.5.
Sec. 25. (a) The employee classification fund is established to
provide funds for:
(1) administering this chapter;
(2) investigating contractors, agents of contractors, and
subcontractors;
(3) determining whether there is proof to substantiate
allegations of failure to properly classify employees; and
(4) meeting other expenses incurred in carrying out the duties
of the department under this chapter.
The fund consists of civil penalties collected by the department
under this chapter. The fund shall be administered by the
department.
(b) The expenses of administering the fund shall be paid from
money in the fund.
(c) The treasurer of state shall invest the money in the fund not
currently needed to meet the obligations of the fund in the same
manner as other public money may be invested. The interest that
accrues from these investments shall be deposited in the fund.
(d) Money in the fund at the end of a state fiscal year does not
revert to the state general fund.
Sec. 26. IC 22-1-1-18 applies to a violation of this chapter. When
it appears to the department that a contractor, an agent of a
contractor, or a subcontractor has violated a valid order of the
department issued under this chapter, the department may:
(1) commence an action through the attorney general; and
(2) seek an order from the superior or circuit court in the
county in which the contractor or subcontractor does
business;
mandating the contractor or the subcontractor to obey the order
of the department. The failure of the contractor or the
subcontractor to obey a court order obtained under this section is
contempt of court.
Sec. 27. (a) Except as provided in subsection (b), a contractor,
an agent of a contractor, or a subcontractor that intentionally fails
to properly classify an individual as an employee under section 16
of this chapter commits a Class C misdemeanor.
(b) A contractor, an agent of a contractor, or a subcontractor
that recklessly, knowingly, or intentionally attempts to induce an
individual to waive any provision of this chapter commits a Class
D felony.
(c) IC 6-3-7-5(m) applies to a contractor or subcontractor who
knowingly or intentionally causes or assists an employee, including
a temporary employee, to file a false statement and supporting
documentation for purposes of this chapter.
Sec. 28. (a) The department shall post a summary of the
requirements of this chapter on the Internet web site of the
department.
(b) After the imposition of a civil penalty under section 22(b) of
this chapter, thirty (30) business days after the initiation of the
investigation, the department shall place the contractor's or
subcontractor's name on a list maintained on the Internet web site
of the department. A contract for a public work may not be
awarded by the state or a political subdivision to:
(1) a contractor or subcontractor whose name appears on the
list; or
(2) a firm, a corporation, a partnership, or an association in
which the contractor or subcontractor has an interest;
until four (4) years after the posting of the contractor's or
subcontractor's name on the list. If a contractor, agent of the
contractor, or subcontractor files a timely petition for review
under section 24(b) of this chapter, the contractor's or
subcontractor's name shall not be added to the list until the
department's determination that the contractor or subcontractor
has violated this chapter is final.
Sec. 29. (a) It is a violation of this chapter for a contractor, an
agent of a contractor, or a subcontractor to retaliate through
discharge or in any other manner against a person for exercising
a right granted under this chapter.
(b) It is a violation of this chapter for a contractor, an agent of
a contractor, or a subcontractor to retaliate against a person for:
(1) making a complaint to a contractor or an agent of a
contractor, to a coworker, to a community organization, to a
state or federal agency, or within a public hearing that rights
guaranteed under this chapter have been violated;
(2) causing a proceeding under or related to this chapter to be
instituted; or
(3) testifying or preparing to testify in an investigation or
proceeding under this chapter.
(c) Retaliation through discharge or in any other manner
subjects a contractor, an agent of a contractor, or a subcontractor
to a private civil action brought by the aggrieved person.
(d) In a civil action for unlawful retaliation, the court may
award:
(1) all legal or equitable relief, or both, as appropriate; and
(2) attorney's fees and costs.
(e) The right of an aggrieved person to bring a civil action under
this section terminates three (3) years after the final date of
performing services for the contractor or subcontractor by the
affected employee. However, the period of limitation established by
this subsection is tolled if the contractor, an agent of the
contractor, or a subcontractor has deterred a person's exercise of
rights under this chapter.
Sec. 30. If an interested party is found by the department to
have requested four (4) investigations under section 19(a) of this
chapter concerning the alleged failure to properly classify an
independent contractor as an employee by the department within
a period of one (1) year, whether the interested party:
(1) requested four (4) investigations of the same contractor or
subcontractor; or
(2) requested four (4) investigations of different contractors
or subcontractors;
and if the department finds all the requests for investigations to
have been groundless, the interested party shall be assessed a civil
penalty of five hundred dollars ($500) per requested investigation
by the department. A civil penalty assessed and paid under this
section shall be deposited in the employee classification fund
established by section 25 of this chapter.
Sec. 31. (a) Beginning July 1, 2010, the:
(1) department of revenue;
(2) department;
(3) board; and
(4) department of workforce development;
shall, after June 30 and before January 1 of each year, report to
the legislative council on the activities of each agency under this
chapter concerning any suspected improper classification of an
employee as an independent contractor by a contractor, an agent
of a contractor, or a subcontractor. The agencies may collaborate
on the report.
(b) A report to the legislative council under this section must be
in an electronic format under IC 5-14-6. The legislative council
shall transmit a copy of the report to the chairperson of the house
of representatives and senate standing committees concerned with
labor and employment issues.
Sec. 32. A person may not waive any provision of this chapter.
Sec. 33. A finding made under this chapter:
(1) is for the purpose of enforcing this chapter; and
(2) is not admissible or binding against a party in a
proceeding other than a proceeding under this chapter.
allegation of improper classification of an employee as an
independent contractor in violation of IC 22-2-15.
(c) If the workers' compensation board, during its investigation,
determines that a contractor or subcontractor has failed to
properly classify an independent contractor as an employee on a
public work (as defined in IC 36-1-12-2), and the contractor or
subcontractor fully conforms to the decision of the worker's
compensation board, either by:
(1) properly classifying all employees found to be improperly
classified as an independent contractor not later than seven
(7) business days after notification by the worker's
compensation board of the determination; or
(2) ceasing all work on the public work not later than seven
(7) business days after notification;
the contractor or subcontractor shall be found to be in
conformance with the decision of the the worker's compensation
board, and no fee or penalty becomes due.
(d) If the worker's compensation board discovers, more than
seven (7) business days after notification by the worker's
compensation board of the determination under subsection (c), that
the contractor or subcontractor continues to improperly classify an
employee as an independent contractor, the contractor or
subcontractor is subject to a civil penalty of five hundred dollars
($500) per improperly classified employee, to be assessed and
collected by the board.
(e) Civil penalties assessed and collected under this section shall
be deposited in the worker's compensation supplemental
administrative fund established by section 6 of this chapter.
(f) If an interested party (as defined in IC 22-2-15-11) is found
by the worker's compensation board to have requested four (4)
investigations concerning the alleged improper classification of an
employee as an independent contractor by the worker's
compensation board within a period of one (1) year, whether the
interested party:
(1) requested four (4) investigations of the same contractor or
subcontractor; or
(2) requested four (4) investigations of different contractors
or subcontractors;
and, if the worker's compensation board finds all requests to have
been groundless, the interested party shall be assessed a civil
penalty of five hundred dollars ($500) per requested investigation
by the worker's compensation board. A civil penalty assessed and
paid under this subsection shall be deposited in the worker's
compensation supplemental administrative fund established by
section 6 of this chapter.
JULY 1, 2009]: Sec. 1. (a) Except as provided in this section, this
chapter applies to all public work performed or contracted for by
(1) political subdivisions and
(2) their agencies
regardless of whether it is performed on property owned or leased by
the political subdivision or agency.
(b) This chapter does not apply to an officer or agent who, on behalf
of a municipal utility, maintains, extends, and installs services of the
utility if the necessary work is done by the employees of the utility.
(c) This chapter does not apply to hospitals organized or operated
under IC 16-22-1 through IC 16-22-5 or IC 16-23-1, unless the public
work is financed in whole or in part with cumulative building fund
revenue.
(d) This chapter does not apply to tax exempt Indiana nonprofit
corporations leasing and operating a city market owned by a political
subdivision.
(e) As an alternative to this chapter, the governing body of a school
corporation may:
(1) participate in a utility efficiency program; or may
(2) enter into a guaranteed savings contract as permitted under
IC 36-1-12.5; or
(3) enter into a project labor agreement.
(f) This chapter does not apply to a person that has entered into an
operating agreement with a political subdivision or an agency of a
political subdivision under IC 5-23.
(g) In addition to this chapter, IC 22-2-14 applies to contractors,
subcontractors, employees, and independent contractors with
respect to construction services performed on public work
projects.