Ohio H.B. 347
Status: Introduced, November 12, 2013
Under this bill, Ohio would create a uniform definition of employee for the purposes of several major labor and tax laws. The bill would also create penalties and allow for civil actions for improperly classifying an employee or violating several other related requirements and restrictions.
Uniform Definition of Employee
The proposed uniform definition of “employee” is an individual who performs services for compensation for an employer.
Under the proposed uniform definition, “employee” would specifically not include an individual who performs services for an employer and to whom all of the following conditions apply:
- The individual has been and continues to be free from control and direction in connection with the performance of the service.
- The individual customarily is engaged in an independently established trade, occupation, profession, or business of the same nature of the trade, occupation, profession, or business involved in the service performed.
- The individual is a separate and distinct business entity from the entity for which the service is being performed or, if the individual is providing construction services and is a sole proprietorship or a partner in a partnership, the individual is a legitimate sole proprietorship or a partner in a legitimate partnership to which Ohio Rev. Code § 4175.04 applies, as applicable.
- The individual incurs the main expenses and has continuing or recurring business liabilities related to the service performed.
- The individual is liable for breach of contract for failure to complete the service.
- An agreement, written or oral, express or implied, exists describing the service to be performed, the payment the individual will receive for performance of the service, and the time frame for completion of the service.
- The service performed by the individual is outside of the usual course of business of the employer.
For purposes of the above, “employer” means any person, the state, any agency or instrumentality of the state, and any municipal corporation, county, township, school district, or other political subdivision or any agency or instrumentality thereof that engages an individual to perform services.
For purposes of the above, “construction” means any constructing, altering, reconstructing, repairing, rehabilitating, refinishing, refurbishing, remodeling, remediating, renovating, custom fabricating, maintenance, landscaping, improving, wrecking, painting, decorating, demolishing, and adding to or subtracting from any building, structure, highway, roadway, street, bridge, alley, sewer, ditch, sewage disposal plant, water works, parking facility, railroad, excavation, or other structure, project, development, real property or improvement, or to do any part thereof, regardless of whether the performance of the work involves the addition to or fabrication of any material or article of merchandise into any structure, project, development, real property, or improvement. “Construction” also includes moving construction-related materials to the job site and removing construction-related materials from the job site.
An employer and the director of commerce shall consider a sole proprietorship or partnership that performs construction services for the employer to be a legitimate sole proprietorship or a legitimate partnership if the employer demonstrates all of the following:
- The sole proprietorship or partnership performs the construction service free from the direction or control of the employer over the means and manner of providing the service, subject only to the right of the employer for whom the service is provided to specify the desired result.
- The sole proprietorship or partnership is not subject to cancellation or destruction upon severance of the relationship with the employer.
- The owner of the sole proprietorship or the partners in the partnership have a substantial investment of capital in the sole proprietorship or partnership beyond ordinary tools and equipment and a personal vehicle.
- The sole proprietorship or partnership owns the capital goods, gains the profits, and bears the losses of the sole proprietorship or partnership.
- The sole proprietorship or partnership makes its construction services available to the general public or the business community on a continuing basis.
- The sole proprietorship or partnership reported a profit or loss or earnings from self-employment on the sole proprietorship or partnership’s federal income tax schedule.
- The sole proprietorship or partnership performs construction services for the employer under the name of the sole proprietorship or partnership.
- If the construction services the sole proprietorship or partnership provides to the employer require a license or permit in order to provide those services, the sole proprietorship or partnership obtains the appropriate license or permit in the name of the sole proprietorship or partnership name and directly pays for the appropriate license or permit.
- The sole proprietorship or partnership furnishes the tools and equipment necessary for the sole proprietorship or partnership to provide the construction service for the employer.
- If necessary, the sole proprietorship or partnership hires its own employees without obtaining approval from the employer, pays those employees without direct reimbursement from the employer, and reports the employees’ income to the internal revenue service.
- The employer does not represent the sole proprietorship or the partners of the partnership as an employee of the employer to the employer’s customers.
- The sole proprietorship or partnership performs similar construction services for others on whatever basis and whenever the sole proprietorship or partnership chooses.
If the director of commerce, using the above factors, determines that a sole proprietorship or partnership performing construction services for an employer is not a legitimate sole proprietorship or a legitimate partnership, the director shall consider the owner of the sole proprietorship, each partner of the partnership, and each of the employees of the sole proprietorship or partnership, as applicable, as an employee of the employer.
Minimum Wage Law
The uniform definition of employee would apply to Ohio minimum wage laws. As such, “employee” and “independent contractor” would no longer have the same meanings as they do in the Fair Labor Standards Act of 1938.
Wage Payments, Fringe Benefits, and Employee Authorized Deductions
The uniform definition of employee would apply to laws dealing with the required frequency of wage payments, promised fringe benefits, and employee authorized deductions from wages.
Prevailing Wage Law
The uniform definition of employee would apply to Ohio’s prevailing wage law.
Industrial Commission and Bureau of Workers’ Compensation
The uniform definition of employee would apply to Ohio’s Industrial Commission and Bureau of Workers’ Compensation.
Workers’ Compensation Law
The uniform definition of employee would apply to Ohio’s workers’ compensation law. The existing inclusions and exclusions in the workers’ compensation law would remain.
Unemployment Compensation Law
The uniform definition of employee would apply to Ohio’s unemployment compensation law, unless the services performed by the individual do not constitute “employment” as defined in the unemployment compensation law.
The existing inclusions and exclusions in the unemployment compensation law would largely remain.Â However, the bill would make the following changes to the definition of employment in the unemployment compensation law:
- The current definition of “employment” includes services performed as an “agent-driver or commission-driver.” This bill would change that to “delivery driver.” Further, for such deliver drivers, milk would no longer be an excluded beverage that removes their services from the definition of employment. Finally, this bill would add”parcels,” “freights,” or “similar products” to the list of items a “delivery driver” may engage in distributing while still having their service constitute employment.
- The current definition of “employment” includes services performed as a “traveling or city salesperson.” This bill would remove language in that inclusion that indicates such services would be “deemed employment if the contract of service contemplates that substantially all of the services are to be performed personally by the individual and that the individual does not have a substantial investment in facilities used in connection with the performance of the services other than in facilities for transportation, and the services are not in the nature of a single transaction that is not a part of a continuing relationship with the person for whom the services are performed.”
- The current definition of “employment” includes constructions services performed by any individual under a construction contract. This bill would remove a provision that limits coverage of such services to situations where the director “determines that the employer for whom the services are performed has the right to direct or control the performance of the services” and where the individuals performing the service “receive remuneration.”
- The current definition of “employment” excludes service performed for one or more principals by an individual who is compensated on a commission basis, who in the performance of the work is master of the individual’s own time and efforts, and whose remuneration is wholly dependent on the amount of effort the individual chooses to expend, and which service is not subject to the “Federal Unemployment Tax Act.” This bill would remove that exclusion, but would retain a related exclusion for insurance agents and insurance solicitors, if all of their service is performed for remuneration solely by way of commission.
Income Tax Law
The uniform definition of employee would apply to Ohio’s income tax law, unless the internal revenue service has accepted the classification of an individual as an independent contractor made by the individual and the individual’s payer.
The director of commerce shall create a summary of the requirements of this bill in English and Spanish and shall post that summary on the official web site maintained by the department of commerce and on the bulletin boards located in each of the offices of the department.
If an employer engages an individual to perform services and that individual is not considered an employee, that employer shall post and keep posted, in a conspicuous place on each job site where that individual performs services and in each of the employer’s offices, the notice prepared by the director pursuant to the previous paragraph. The director shall furnish copies of the notice without charge to an employer upon request.