PA WORKPLACE MISCLASSIFICATION
EMPLOYEE OR INDEPENDENT CONTRACTOR?
Act 72 (02-10-2011)
Misclassification of employees as independent contractors is illegal for all commercial and residential construction in PA.
In addition to the guidelines shared for Unemployment Compensation, independent contractors must also maintain liability insurance of at least $50,000.
Under Act 72, a company or its officer or agent may be subject to penalties if the business fails to properly classify an employee under the PA Workers Compensation Act or Unemployment Compensation Law.
INSURANCE IMPACT
PROOF OF INSURANCE FROM SUB-CONTRACTORS
Typically, you will want to ask for proof of insurance from your independent sub-contractors. You can set a minimum acceptable limit that is higher than the $50,000 required by the PA Department of Labor & Industry.
Specifically, you should ask for a Certificate of Insurance – a snapshot of coverage in place as of that date.
PROVIDING PROOF OF INSURANCE TO A GENERAL CONTRACTOR
You may serve as an independent sub-contractor. In that case, you can expect to provide proof of insurance. If the general contractor also asks to be named as Additional Insured, realize you are “sharing” your liability limit.
PA UNEMPLOYMENT COMPENSATION
EMPLOYEE OR INDEPENDENT CONTRACTOR?
Publication UCP-32
A helpful guide is available at the PA Department of Labor & Industry website, under Employer UC Services.
That guide offers, in part, the following advice:
- The individual has been and will continue to be free from control or direction over the performance of the services involved…
- As to these services, the individual is customarily engaged in an independently established trade, occupation, profession or business.
- …the individual must possess the essential tools, equipments and other assets necessary to perform the services…
- Realize a profit or suffer a loss as a result of performing the services
- Perform the services through a business in which the individual has a proprietary interest
- Maintain a business location that is separate from the location of the person for whom the services are being performed.
The following factors are NOT conclusive proof of independent contractor status:
- Employer designation as an “independent contractor”
- Statement by an individual that he/she is an “independent contractor”
- Issuance of Federal Form 1099
DISCLAIMER: This brochure is provided as a convenient summary. It is not an offer of coverage. Details, limitations and exclusions are found in the actual policies.