The Delaware Contractor Registration Act: What Businesses Should Know

Cohen Seglias Pallas Greenhall & Furman PC
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In efforts to reduce worker misclassification, the State of Delaware recently enacted the “Delaware Contractor Registration Act,” which requires all businesses performing construction services or maintenance in Delaware to enroll with the Delaware Department of Labor’s Office of Contractor Registration before their work begins. Originally enacted in July 2019 and scheduled to take effect in October 2020, the new law did not go into effect until July 1, 2021 due to the pandemic. Any business currently performing public work in the state must register by August 1, 2021 with the Department of Labor, and any business currently performing private work in the state should register immediately. Businesses that fail to comply with the new act risk penalties ranging from $1,000 to $85,000.
 

Under the law, “construction services” includes all building or work on a building, structure or improvement of any type including bridges, dams, plants, highways, parkways, streets, tunnels, sewers, mains, power lines, pumping stations, heavy generators, railways, airports, terminals, docks, piers, wharves, buoys, jetties, breakwaters, levees, canals, dredging, shoring, rehabilitation and reactivation of plants, scaffolding, drilling, blasting, excavating, and clearing and landscaping, including tree cutting.

“Maintenance” means the repair of existing facilities when the size, type or extent of such facilities is not changed or increased.

According to legislators, the law was enacted, among other reasons, to decrease workplace fraud by tracking contractor activity from the time it enters the marketplace through project completion. The act also establishes enforcement policies that will discourage and prevent the unfair competition that arises from the misclassification of employees as independent contractors and the resulting deflated labor costs.

Businesses can register by submitting the application through the mail or through the contractor registration page on Delaware’s One Stop System, the state’s licensing and registration portal for all businesses operating in the state.

As indicated in the law and on the One Stop registration page, to successfully complete the contractor certification application, businesses or individuals need to submit the following information:

  • Name, principal business address, telephone number, fax number and e-mail address.
  • Type of business entity, including corporation, partnership or sole proprietorship.
  • If the principal business address is not within the Delaware, the name and address of the custodian of records and agent for service of process in the state.
  • The name of the person, the date and nature of the violation, conviction, or judgment and all additional information requested by the Department of Labor if the contractor or a person holding a financial interest in the contractor’s business has ever done any of the following:
    1. Held a financial interest in a licensed entity that was cited by the Department for a violation of a labor law;
    2. Been convicted of home improvement fraud under § 916 of Title 11 or new home construction fraud under § 917 of Title 11; or
    3. Been found to have engaged in an unlawful practice under § 2513 of Title 6.
  • Listing of any labor law violations or fraud that occurred in the last two years. You will need to provide the dates and outcome of each violation (g., settlement, compliance, court decision, fines, and/or penalties, etc.).
  • The federal employer identification number, the state taxpayer identification number, individual tax identification number or other tax identification number.
  • Proof of Delaware workers’ compensation insurance, including the policy number and a digital copy of the policy.
  • Delaware business license and number.
  • Delaware Unemployment Insurance SUI number.
  • A safety plan that is compliant with the requirements established by the Occupational Safety and Health Administration (OSHA) or evidence that you are creating a compliant plan.
  • NAICS Code(s).
  • A valid credit card for payment (online) or check for paper registration form.

The non-refundable fee for registration is as follows:

  • For the initial year and the second year, the non-refundable annual registration fee is:
    • $200 if you perform private construction or maintenance
    • $300 if you perform public construction or maintenance
  • After the first two years, businesses who meet the following criteria may obtain a two-year registration:
    1. The contractors must have been continuously registered for the last two consecutive years;
    2. The renewal application must be received well prior to expiration date; and
    3. The contractor must have no prior violations of state or federal labor laws.
  • The two-year registration fee is:
    • $300 if you perform private construction or maintenance
    • $500 if you perform public construction or maintenance

All certificates must be renewed at least 30 days prior to the expiration date of the current certificate.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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