Q: What is Workplace Fraud?
A: Workplace Fraud occurs when an employer fails to properly classify a worker as an "employee," even when the worker legally should be classified as an "employee," rather than as an independent contractor. When a worker is misclassified in this manner, they lose access to critical workplace protections that are guaranteed only to employees, including workers' compensation and unemployment insurance benefits. The practice of misclassifying an individual allows employers to cut their payroll costs by up to 30 percent which undercuts law abiding employers and depriving taxpayers of critical revenue.
Q: What industries does the Workplace Fraud law
A: For purposes of Unemployment Insurance, employers are required
to pay unemployment insurance for their employees. Under the Workplace
Fraud Act, the Commissioner of Labor and Industry has authority
to address misclassification of individuals in the construction
and landscaping industries only.
Workers in other industries may seek guidance by visiting the
Task Force on Workplace Fraud web page or emailing the Joint
Task Force at firstname.lastname@example.org.
Q: How do I know if I have been properly classified in the workplace?
A: Federal and state tax and labor laws use different tests to determine if a worker is an employee or an independent contractor. The common factor under all of these tests is: how much direction and control does the employer have over the worker and the work performed?
The Workplace Fraud Act adopts the ABC test, which has long been used in Maryland's Unemployment Insurance law, to determine whether a worker in the construction or landscaping industries is an employee or an independent contractor. The ABC test is a three pronged test, under which an employer-employee relationship is presumed unless the individual performing the work is either an exempt person (an individual who operates their own business and does not have any employees other than their family members) or the employer demonstrates that:
- The individual is free from control and direction;
- The individual customarily is engaged in an independent business of the same nature; and
- The work is outside of the usual course of business of the
employer or performed outside of any place of business of the
Work is "outside the usual course of business" if the
individual: 1) performs the work off the employer's premises; 2)
performs work that is not integrated into the employer's operation;
or 3) performs work unrelated to the employer's business.
For examples of the application of this test to the construction
and landscaping industries see COMAR
09.12.40.05 and 09.12.40.06.
For further information on other State and federal tests that may
apply, see the Joint Enforcement Task Force on Workplace Fraud
Q: If I believe I have been misclassified as an independent contractor and should be entitled to unpaid overtime or other wages or I would like additional information, what should I do?
A: You can contact the Workplace Fraud Unit of the Division of Labor and Industry by e-mail at
email@example.com, or call 410-767-9885.
Q: If I believe I have been misclassified as an independent contractor and should be entitled to unemployment insurance benefits, what should I do?
A: You can contact the unemployment insurance division by e-mail at firstname.lastname@example.org. You can also fax your information to 410-767-2612. All information will be treated as confidential.
Q: My general contractor gave me a 'Notice to Independent Contractors and Exempt Persons" to complete and I feel that I do not meet the requirements to be classified as either. What should I do?
A. This notice should NOT be given to subcontractors to complete. This notice is to be completed by general contractor informing their subcontractors of their classification status as an independent contractor or exempt person. It also informs the subcontractor that if they hire subcontractors to work for them, that they should also comply and post this notice.
|Worker Classification Protection Unit
Division of Labor and Industry
1100 North Eutaw Street, Room 607
Baltimore, Maryland 21201
Telephone: (410) 767-9885