The first cases addressing the impact of Pennsylvania’s Construction Workplace Misclassification Act (“CWMA”) in the context of the Pennsylvania’s Workers’ Compensation Act, have finally reached the Appellate Courts. The CWMA, which became effective on February 10, 2011, imposes criminal and administrative penalties for the misclassification of employees as “independent contractors” at commercial and residential construction sites in Pennsylvania. “Construction” is broadly defined to include “erection, reconstruction, demolition, alteration, modification, custom fabrication, building assembly, site prep and repair work,” at both residential and commercial sites.
The CWMA details a multi-prong test for determining whether a worker is an “employee” or “independent contractor” for purposes of the Act:
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The individual must have written contract to perform such services;
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The individual must be free from control or direction over the performance of such services, both by contract and in fact;
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The individual must be customarily engaged in an independently established trade, occupation, profession or business, with a business location separate from the location of the person for whom services are being performed; and
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The individual must maintain liability insurance during the term of the contract of at least $50,000.
What had been unclear for some time, was whether the formal requirements of the CWMA would supplant the common law definition of “employee” under the Pennsylvania Workers’ Compensation Act, which had focused primarily on a traditional “direction and control test” for distinguishing between independent contractors and employees. This issue was recently addressed in D & R Construction v WCAB. The Commonwealth Court in D & R Construction ruled that, for injuries occurring at construction sites on or after February 10, 2011, the injured worker will be deemed an employee, unless all of the mandatory criteria are in place for a finding of independent contractor status, pursuant to the CWMA. Additionally, all criteria should be given equal weight by the WC Judge, and if any one is absent, the injured worker will be deemed to be an “employee” of the business entity requesting the services.
In light of this ruling and pending clarification by the Pennsylvania Supreme Court, it is critically important that employers utilizing subcontractors at Pennsylvania residential and commercial project sites, make sure that such subcontractors and their employees meet the definition of “independent contractors” under the CWMA and are properly insured for both liability and workers’ compensation. Contractual indemnification language may also be advantageous, in the event of an unexpected construction site injury or claim.
