IC Alert: Colorado

The Independent Contractor Monitor

[Reprinted with permission from Contractor Management Services, LLC]

Through regular newsletters, CMS is taking the lead in making sure that everyone is aware of the issues, nationwide, regarding the use of independent contractors because with awareness comes the appropriate action. If you would like others to receive these updates, please use the following link: http://www.icadvantage.com/Email.asp

PENNSYLVANIA

House Bill 1215 (HB 1215) is still working its way through the Pennsylvania Assembly and is currently before the Appropriations Committee (recommitted on Feb. 8, 2006). First introduced in March 2005, HB 1215 is intended to provide clarity to the issue of independent contractors and the application of Pennsylvania’s workers’ compensation laws.

The current version of HB 1215 (as amended December 14, 2005) will establish that an Independent Contractor, for workers’ compensation purposes, is the owner of any business entity who does not employ other persons and who meets the following requirements:

1. Has a written agreement to perform specific work for a specific amount of money;
2. Controls the means and manner of work performed, subject to any state or federal regulatory requirements;
3. Compensation is received on a commission or per-job basis, and not hourly, daily or other time period, and realizes a profit or loss from such work;
4. Is not prohibited from making comparable services available to the general public;
5. Maintains a separate business and furnishes significant tools, materials and equipment to perform the work;
6. Holds one or more bank accounts for purposes of paying business expenses or other expenses related to work performed; and
7. Is not treated as an employee for purposes of income or employment taxation with regard to work performed.

One requirement that may be problematic is the requirement that independent contractors maintain a separate bank account to pay business expenses.  If the bill is passed with this requirement, companies using independent contractors in Pennsylvania will have to remain diligent in verifying each independent contractor maintains a business bank account.

There are several favorable aspects of HB 1215 worth noting.  First, the bill states clearly and unambiguously that a person or entity using the services of an independent contractor is not liable under the workers’ compensation laws for an injury sustained by an independent contractor.  This should help deal with workers’ compensation carriers who try to extort premiums for workers who are independent contractors and not employees.  Second, the bill provides that independent contractors shall register their status with the Department of Labor.  The form of registration will contain a statement that the individual acknowledges his/her status as an independent contractor and that the individual is not eligible for benefits under the workers’ compensation laws.  This will be binding on the individual (independent contractor) unless it can be shown that the employer knowingly and with intent to defraud forced the worker to register as an independent contractor.

Dennis P. Roccaforte
President - Contractor Management Services, LLC.

If you would like to speak to a CMS representative you can contact us at (800) 742-7508 or visit our website at www.ICTheRightWay.com.