Are You Complying with the Workplace Fraud Act? - Worker Classification Protection

Under Maryland's Workplace Fraud Act, workers in the construction and landscaping industries are presumed to be employees of the person or business for whom they perform services.  However, construction and landscaping businesses are not required to treat all workers with whom they have a working relationship as employees if the worker is, in fact, an independent contractor under the law.

The Workplace Fraud Act provides four exceptions by which the presumption of employment can be overcome.

1. The worker may be an "exempt person."  An "exempt person" within the meaning of the Workplace Fraud Act is an individual who operates an independent business as a sole proprietor and who has no employees other than a parent, child, or spouse.
2. The worker is an independent contractor if, based on an application of the ABC test to the facts and circumstance in the specific case, an independent contractor relationship exists:
1. The worker is free from direction and control over the manner and means by which the work is done;
2. The worker is engaged in an independent business or occupation of the same nature as that involved in the work; and,
3. The work is performed outside the usual course of business of the person for whom the services are performed, or the work is performed outside of any place of business of the person for whom the work is performed.
3. A business may subcontract some of its work by entering into a contractual relationship with another business entity, which may have its own employees, to do the same type of work as the business, at the same location where the business is working, without creating an employment relationship between the two businesses.
4. A business may subcontract some or all of its work to another business entity if:
1. The work is done under a written contract that meets certain statutory requirements;
2. The business entity provides an affidavit indicating that the individual or business entity is an independent contractor who is available to work for others;
3. The business entity is registered with the Department of Assessments and Taxation and is in "good standing;" and,
4. The business entity holds any and all required occupational licenses for the work performed.

Regardless of which exception may apply, the business must provide each worker with whom it contracts with a written notice, in both English and Spanish, which explains the implications of the individual's classification as an independent contractor or "exempt person" rather than as an employee.

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