On October 13, 2010, Pennsylvania Governor Ed Rendell signed "The Construction Workplace Misclassification Act." This law establishes a test to determine if a construction industry worker is an independent contractor or an employee for purposes of the workers' compensation and unemployment compensation laws. It is aimed at eliminating misclassification in Pennsylvania's construction industry by establishing three factors that must be met for a worker to be properly deemed an independent contractor. An individual who performs services in the construction industry for remuneration is an independent contract only if:
- "The individual has a written contract to perform such services;"
- "The individual is free from control or direction over performance of such services both under the contract and in fact;" and
- "As to such services, the individual is customarily engaged in an independently established trade, occupation, profession, or business."
To be classified as independent contractors, individuals must not only possess their own tools, but they must also maintain liability insurance of at least $50,000. In addition, they must expect to realize a profit or loss, must perform the services through a business in which they have a proprietary interest, and must maintain a business location separate from the location of the person for whom the services are being provided. They must also either hold themselves out to the public to perform similar services or have a history of doing so while free from direction or control by others.
Under the law, each person misclassified as an independent contractor may be the basis for a separate offense. Intentional violations of the law are treated as criminal misdemeanors, while unintentional violations are treated as summary offenses and subject to a fine of up to $1,000. Prior convictions may be used as evidence of intent. The secretary of labor and industry may also assess civil penalties of up to $1,000 for a first violation and up to $2,500 for each subsequent violation. For intentional violations, the secretary may also petition the court to issue a stop-work order on the construction project requiring the cessation of work by individuals who are improperly classified as independent contractors. The new law goes into effect on February 10, 2011.
The secretary of labor and industry is required to create a poster for job sites which outlines the requirements and penalties under the law.
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