If Missouri is the “Show me” state, Pennsylvania is in the running for the “show me the documents” state. They have a way of over-engineering solutions to what may or may not be problems. (See our prior post [“Blood on the Forms“] on requiring injured workers to sign 2 forms at the time of injury.) Now the Keystone state weighs in on the independent contractor conundrum through the recently implemented Construction Workplace Misclassification Act, also known as Act 72.
In tackling the problem of misclassification, Pennsylvania has done something smart: they have limited the scope of the law to the construction industry, where the worst abuses abide. (Massachusetts kicked a hornets nest with an expansive definition of independent contractor that extends well beyond construction.) The statute contains the usual and customary language requiring independent contractors to control the work, work for others and provide their own tools. But in its relentless need for documentation, Pennsylvania requires general contractors and subs to get out the pens and archive some paper. Independent contractors must:
– Have a written contract for every job
– Carry at least $50,000 in general liability coverage for the duration of the job (this requires a certificate of insurance from the agent)
– Document a proprietary interest in their business (how would a sole proprietor do this – tax forms?)
– Realize a profit or suffer a loss for the project (an interesting and potentially problemmatic issue for craftsmen whose spouses are not accountants)
Act 72 prohibits general contractors from forcing subs to sign any contract that results in misclassification. It also forbids retaliation against any person who files a complaint under the law.
The Amish Exception
As we pointed out in a previous blog, Pennsylvania’s Amish population (roughly 51,000 total) is generally exempt from insurance requirements. Amish employers are not required to provide social security or workers compensation coverage, and it appears likely that the Amish will be exempt from the new health insurance standards. When a need arises, they pass the (rather old fashioned) hat throughout their community.
So what happens when an Amish (or non-Amish) general contractor hires an Amish sub? Which of Act 72’s requirements apply to the Amish? Certainly not the general liability insurance. Perhaps not the “profit and loss” and “proprietary interest” documentation. While we are not suggesting that employers seek out Amish subs to avoid Act 72, it might simplify matters. For everyone else in PA, it’s time to focus on the paperwork.