Maryland law recently changed to clarifying the definition of employees and independent contractors, according a business lawyer.
The amendments to the Maryland Workplace Fraud Act of 2009 recently took effect, changing the presumption that all workers are categorized as “employees” and not “independent contractors,” said Michael Siri, a partner with Bowie & Jensen, a business law firm.
In 2009, the Maryland General Assembly passed the WFA to address the misclassification of “employees” as “independent contractors.” While employees received specific workplace protections in Maryland, independent contractors do not, which would enable them to circumvent the payment of payroll taxes or the need to make contributions to Maryland’s unemployment and worker’s compensation insurance funds. Some business owners, however, found the WFA targeted specific industries within Maryland, according to Siri.
The amendments enacted by the Maryland General Assembly this year allow a business owner in Maryland to rebut the presumption that an employer-employee relationship exists whenever a payment is made for services performed by allowing the employer to produce documents in support of an independent contractor relationship. This change allows a clear guideline for businesses to ensure compliance with the law and resolving any alleged claims of misclassification prior to facing any potential penalties, according to Siri.
Siri said a Maryland business owner must produce the following documents under the 2012 amendments of the WFA to rebut the presumption of an employer-employee relationship:
- Written contract between the employer and the contractor, which includes the description of the nature of the work to be performed, the method of compensation by the employer to the contractor, and acknowledge by the contractor of its obligation to maintain unemployment and worker’s compensation insurance, as well as, pay payroll taxes.
- A signed affidavit by the contractor that states that it is an independent contractor and is available to work for business entities other than the employer.
- A certificate of good standing from the contractors from the Maryland State Department of Assessment and Taxation.
- Proof of all occupational licenses held by the contractor for all state and local authorities.
- Proof that proper notice was given from the employer to the contractor regarding the implications of the classification.
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