Bill S.B. 107
This would bill create a uniform standard for determining whether an individual is an employee or independent contractor. For purposes of the bill, an employee is an individual who performs services for compensation for an employer, but an employee does not mean an individual who performs services for an employer and to whom all of the following conditions apply:
(a) The individual has been and continues to be free from control and direction in connection with the performance of the service.
(b) 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.
(c) 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, as applicable.
(d) The individual incurs the main expenses and has continuing or recurring business liabilities related to the service performed.
(e) The individual is liable for breach of contract for failure to complete the service.
(f) 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.
(g) The service performed by the individual is outside of the usual course of business of the employer.
The would bill incorporate the above definition of an independent contractor to create a uniform definition of employee among several existing Ohio statutes, including those regarding gift cards, minimum wage, wages and hours on public works, workers’ compensation, and unemployment insurance. In addition, the bill would create new provisions that would make it a violation for an employer to fail to designate an individual who performs services for the employer as an employee unless the conditions above are met. The bill additionally would prohibit requiring or requesting an individual to enter into an agreement or sign a document that results in misclassification and causing an individual to waive the provisions of the bill. The bill would also make it a violation for an employer to retaliate against an individual who makes a complaint or engages in other actions.
According to the bill, if, after a hearing, the Director of Commerce (“Director”) determines that misclassification has taken place, the Director may:(1) Issue and cause to be served on any party an order to cease and desist from further violation of that section;
(2) Take affirmative or other action the Director considers reasonable to eliminate the effect of the violation;
(3) Collect the amount of any wages, salary, employment benefits, or other compensation denied or lost to an individual because the employer misclassified the individual; or
(4) Assess a civil penalty.
Civil penalties for such misclassification, retaliation, and prohibited agreements, would be $1,500 for each violation. For subsequent violations within five years, the civil penalty would be no less than $1,500, but no more than $2,500 for each violation that occurred during such five year period. For purposes of the bill, a separate violation is for each individual or rule involved and for each day the violation continues. The bill additionally would provide for increased penalties for “knowing” violations and also requires such “knowing” violators to be liable to injured employees for punitive damages.
The bill also would provide for a private right of action, under which an aggrieved individual shall be awarded:
(1) the amount of any wages, salary, employment benefits, or other compensation denied or lost to an individual by reason of the violation, plus an equal amount in liquidated damages;
(2) compensatory damages and an amount up to $500 for each violation;
(3) in the case of certain violations, all legal or equitable relief that the court determines appropriate;
(4) attorney’s fees and costs.
Criminal Penalties: According to the bill, those who “knowingly” violate its provisions may be guilty of a misdemeanor of the fourth degree for a first offense, and of a felony of the fifth degree for a subsequent violation within a five-year period after a previous conviction. An entity that attempts or causes an individual to waive the provisions of the bill would be guilty of a misdemeanor of the fourth degree.
The bill would also direct the Director to create a list of those who have committed multiple violations and require certain state agencies to share information concerning suspected misclassification. The bill also would provide that a sole proprietorship or partnership that performs construction services may only be considered a legitimate sole proprietorship or legitimate partnership if all of certain criteria are shown. The bill also would make a contractor liable for the failure of any subcontractor or lower tier subcontractor to properly classify individuals performing services related to construction as employees. A subcontractor would also be liable for the failure of any lower tier subcontractor to properly classify individuals performing services related to construction as employees.
The bill also would amend Ohio unemployment insurance statutes to clarify the following as inclusions in the definition of “employment”:
- As a delivery driver engaged in distributing meat products, vegetable products, fruit products, bakery products, beverages, laundry, parcels, freight, dry-cleaning services, or similar products;
- As a traveling or city salesperson, other than as a delivery driver, engaged on a full-time basis in the solicitation on behalf of and in the transmission to the salesperson’s employer or principal except for sideline sales activities on behalf of some other person of orders from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments for merchandise for resale, or supplies for use in their business operations.
The bill would repeal the current presumption, contained in Ohio unemployment insurance law, that the employer for whom services are performed has the right to control the performance of construction services performed by an individual under a construction contract if ten or more of twenty listed criteria apply.
Finally, the bill would remove the following exclusion from “employmen” for purposes of unemployment insurance:
- 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.