PA’s Construction Worker Misclassification: What You Need to Know

If you are in the construction industry in Pennsylvania, misclassifying your employees can land you in a lot of trouble, under the Construction Workplace Misclassification Act (CWMA). Misclassification of employees can be a result of many factors, including unintentional and innocent errors on the employer’s part. 

However, intentional employee misclassification is prevalent, especially in the construction sector because it minimizes labor costs. Whether the reason for misclassification is an innocent error or deliberate, the offender could be looking at very harsh penalties.

Misclassification Puts the Employee at A Greater Risk

CWMA was enacted in 2011 to crack down on contractors’ designation of all workers in the job site as contractual employees while paying them hourly wages and processing their pay weekly. This arrangement means that the employer is exempted from paying payroll tax, unemployment insurance, and worker benefits.

“When you misclassify employees, let us be clear what you are doing: You are stealing,” said Pennsylvania’s Attorney Rich Godshall of Ostroff Injury Law. “While this practice affects the government and the employee, the employees stand to suffer the most significant loss in the event of an accident.”

A Contractual Employee Is According to CWMA

Under CWMA, an independent contractor must have in their possession a written contract document, be free from the employer’s control, and must have done similar work for other clients. However, proving control or previous engagement as a contractual worker maybe a little complicated. 

Fortunately, the state government has set forth rules that define a contractual worker. According to Pennsylvania’s Labor Department, a worker is deemed free from an employer’s control or having engaged in similar contractual work if:

• They use their own tools, equipment and, material to execute their work
• They are paid per project, rather than an hourly wage
• They are at liberty to provide services to other clients
• They maintain a business location other than the location they offer their services
• They carry a liability insurance cover of at least $50,000 while the contract lasts

While the factors above may not be collective, failing to satisfy any of the above conditions could sway an investigator when determining whether a worker is an employee or an independent contractor. That is why it is essential to meet all these factors when engaging contract workers to ensure you are on the safe side.

CWMA Enforcement Is on the Rise

While the CWMA was enacted in 2011, its criminal enforcement angle was not fully established then. However, over the years, there has been a gradual increase in the number of investigators working cases in the Department of Industry and Labor, with the current number of full-time investigators reaching 28. 

According to the PA’s Department of Labor and Industry reports, over 500 investigations were conducted and completed between 2016 and 2019. Another 64 contractors were charged with CWMA violations in 2020, resulting in approximately $325,000 in combined fines. 

According to the department, figures from 2020 could have been more significant if not for the disruptions caused by the COVID-19 pandemic. The department is hopeful of better cooperation from industry players in 2022 as the industry recovers from the effects of the pandemic.