Bill H.B. 5936
This bill would define an employee and independent contractor in several legal contexts, create penalties and a private cause of action, create a voluntary registration process for most independent contractors, and require registration for independent contractors in the construction industry.
With respect to Rhode Island law regarding payment of wages, the bill defines an independent contractor as any natural person, business, corporation or entity of any kind that provides goods or services to another and that does not qualify as an employee under Section 28-42-7, which states that the determination of independent contractor or employee status shall be the same as those factors used by the Internal Revenue Service in its code and regulations.
With respect to Rhode Island law regarding payment of wages, the bill would create penalties and a private right of action for misclassification of a worker such that:
- The violator is liable:
- to the aggrieved party for liquidated damages in an amount equal to two times the amount of state and federal payroll taxes, employment security contributions, and workers’ compensation premiums for which the employer would have been liable if the employee was properly classified; and
- to the Department of Labor and Training (“Department”) for a civil penalty in the amount of up to five hundred dollars ($ 500) for each misclassified employee for a first offense and up to one thousand dollars ($ 1,000) for any subsequent offense.
The bill also would create a private right of action for an aggrieved party who may recover any unpaid wages and/or benefits, compensatory damages, and liquidated damages in an amount equal to two times the amount of unpaid wages and/or benefits owed, as well as an award of appropriate equitable relief, including reinstatement of employment, fringe benefits and seniority rights, and reasonable attorneys’ fees and costs, and/or such other appropriate relief. Any unpaid fringe benefit contributions owed must be paid to the appropriate benefit fund; however, in the absence of an appropriate fund, the benefit shall be paid directly to the aggrieved employee.
With respect to Rhode Island Employment Security law, the bill would alter the test to distinguish between independent contractors such that:
- The determination of independent contractor or employee status shall be the same as those factors used by the Internal Revenue Service in its code and regulations; provided that, a person performing any service, except as provided under section 28-42-8, shall be presumed an “employee” unless:
(a)(1) the person is free from control and direction in connection with the performance of the service, both under his or her contract for the performance of service and in fact; and either:
(i) the service is performed either outside the usual course of the business of the procurer of the service or outside of all the places of business of the procurer of the service; or
(ii) the person is engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed. This requirement is satisfied, among other ways, where the service performed has historically been recognized as an independent trade, occupation, profession or business and persons engaged therein have historically been treated as independent contractors for tax purposes.
(b) if the provider of the services furnishes and operates capital machinery and/or a specialized or heavy commercial vehicle as the major component of the service provided, it shall be considered a factor demonstrating lack of direction or control by the procurer for purposes of subsection (a)(1) above.
The bill would allow the Director of Labor and Training (“Director”) to provide other requesting state departments or agencies any labor related information, records, or documents, concerning employee misclassification.
The bill would create a voluntary registration process for independent contractors who may identify themselves as independent contractors and file a notice with the Director. Such registration is mandatory for a natural person, sole proprietor, or any single employee business, corporation, or entity of any kind performing construction. Any procurer of services performed by an independent contractor, which has failed to register when required, would be jointly and severally liable for certain penalties imposed under the bill, unless said procurer shall have, prior to work being performed:
(i) filed a notice of procurement of independent contractor services with the director; and
(ii) disclosed to the independent contractor in writing of its intention to pay the party as an independent contractor and not as an employee.
Such a filing and written disclosure to the independent contractor would immunize the procurer from liability for any services of the independent contractor performed for the procurer during the calendar year in which the filing and written disclosure were effectuated. The notice of procurement of independent contractor services required shall identify the registrant as a procurer of independent contractor services and contain such other information and be submitted on such uniform form and in such manner as may be prescribed by the Director. The disclosure of engagement of independent contractor services required shall either be provided using such uniform form as may be prescribed by the Director or by including the substance of the disclosure provided in the forgoing form in the contract of employment or engagement letter procuring the services of the independent contractor.
The bill would direct the Director to provide for the placement of information on any poster required under the Fair Labor Standards Act, informing all workers of their right to be properly classified and the specific detrimental consequences of the misclassification of their status.
