2012 -- S 2527

=======

LC01547

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

____________

A N A C T

RELATING TO LABOR AND LABOR RELATIONS - UNDERGROUND ECONOMY

COMMISSION

     Introduced By: Senators Doyle, Miller, Jabour, and DiPalma

     Date Introduced: February 16, 2012

     Referred To: Senate Labor

It is enacted by the General Assembly as follows:

1-1

     SECTION 1. Sections 28-29-2, 28-29-6.1 and 28-29-17.1 of the General Laws in Chapter

1-2

28-29 entitled "Workers' Compensation - General Provisions" are hereby amended to read as

1-3

follows:

1-4

     28-29-2. Definitions. -- In chapters 29 -- 38 of this title, unless the context otherwise

1-5

requires:

1-6

      (1) "Department" means the department of labor and training.

1-7

      (2) "Director" means the director of labor and training or his or her designee unless

1-8

specifically stated otherwise.

1-9

      (3) (i) "Earnings capacity" means the weekly straight time earnings which an employee

1-10

could receive if the employee accepted an actual offer of suitable alternative employment.

1-11

Earnings capacity can also be established by the court based on evidence of ability to earn,

1-12

including, but not limited to, a determination of the degree of functional impairment and/or

1-13

disability, that an employee is capable of employment. The court may, in its discretion, take into

1-14

consideration the performance of the employee's duty to actively seek employment in scheduling

1-15

the implementation of the reduction. The employer need not identify particular employment

1-16

before the court can direct an earnings capacity adjustment. In the event that an employee returns

1-17

to light duty employment while partially disabled, an earnings capacity shall not be set based

1-18

upon actual wages earned until the employee has successfully worked at light duty for a period of

1-19

at least thirteen (13) weeks.

2-1

      (ii) As used under the provisions of this title, "functional impairment" means an

2-2

anatomical or functional abnormality existing after the date of maximum medical improvement as

2-3

determined by a medically or scientifically demonstrable finding and based upon the Fifth (5th)

2-4

edition of the American Medical Association's Guide to the Evaluation of Permanent Impairment

2-5

or comparable publications of the American Medical Association.

2-6

      (iii) In the event that an employee returns to employment at an average weekly wage

2-7

equal to the employee's pre-injury earnings exclusive of overtime, the employee will be presumed

2-8

to have regained his/her earning capacity.

2-9

      (4) "Employee" means any person who has entered into the employment of or works

2-10

under contract of service or apprenticeship with any employer, except that in the case of a city or

2-11

town other than the city of Providence it shall only mean that class or those classes of employees

2-12

as may be designated by a city, town, or regional school district in a manner provided in this

2-13

chapter to receive compensation under chapters 29 -- 38 of this title. Any person employed by the

2-14

state of Rhode Island, except for sworn employees of the Rhode Island State Police, or by the

2-15

Rhode Island Airport Corporation who is otherwise entitled to the benefits of chapter 19 of title

2-16

45 shall be subject to the provisions of chapters 29 -- 38 of this title for all case management

2-17

procedures and dispute resolution for all benefits. The term "employee" does not include any

2-18

individual who is a shareholder or director in a corporation, general or limited partners in a

2-19

general partnership, a registered limited liability partnership, a limited partnership, or partners in

2-20

a registered limited liability limited partnership, or any individual who is a member in a limited

2-21

liability company. These exclusions do not apply to shareholders, directors and members who

2-22

have entered into the employment of or who work under a contract of service or apprenticeship

2-23

within a corporation or a limited liability company. The term "employee" also does not include a

2-24

sole proprietor, independent contractor, or a person whose employment is of a casual nature, and

2-25

who is employed other than for the purpose of the employer's trade or business, or a person

2-26

whose services are voluntary or who performs charitable acts, nor shall it include the members of

2-27

the regularly organized fire and police departments of any town or city; provided, however, that it

2-28

shall include the members of the police and aircraft rescue and firefighting (ARFF) units of the

2-29

Rhode Island Airport Corporation. Whenever a contractor has contracted with the state, a city,

2-30

town, or regional school district any person employed by that contractor in work under contract

2-31

shall not be deemed an employee of the state, city, town, or regional school district as the case

2-32

may be. Any person who on or after January 1, 1999, was an employee and became a corporate

2-33

officer shall remain an employee, for purposes of these chapters, unless and until coverage under

2-34

this act is waived pursuant to subsection 28-29-8(b) or section 28-29-17. Any person who is

3-1

appointed a corporate officer between January 1, 1999 and December 31, 2001, and was not

3-2

previously an employee of the corporation, will not be considered an employee, for purposes of

3-3

these chapters, unless that corporate officer has filed a notice pursuant to subsection 28-29-19(b).

3-4

In the case of a person whose services are voluntary or who performs charitable acts, any benefit

3-5

received, in the form of monetary remuneration or otherwise, shall be reportable to the

3-6

appropriate taxation authority but shall not be deemed to be wages earned under contract of hire

3-7

for purposes of qualifying for benefits under chapters 29 -- 38 of this title. Any reference to an

3-8

employee who had been injured shall, where the employee is dead, include a reference to his or

3-9

her dependents as defined in this section, or to his or her legal representatives, or, where he or she

3-10

is a minor or incompetent, to his or her conservator or guardian. A "seasonal occupation" means

3-11

those occupations in which work is performed on a seasonal basis of not more than sixteen (16)

3-12

weeks.

3-13

      (5) "Employer" includes any person, partnership, corporation, or voluntary association,

3-14

and the legal representative of a deceased employer; it includes the state, and the city of

3-15

Providence. It also includes each city, town, and regional school district in the state that votes or

3-16

accepts the provisions of chapters 29 -- 38 of this title in the manner provided in this chapter.

3-17

      (6) "General or special employer":

3-18

      (i) "General employer" includes but is not limited to temporary help companies and

3-19

employee leasing companies and means a person who for consideration and as the regular course

3-20

of its business supplies an employee with or without vehicle to another person.

3-21

      (ii) "Special employer" means a person who contracts for services with a general

3-22

employer for the use of an employee, a vehicle, or both.

3-23

      (iii) Whenever there is a general employer and special employer wherein the general

3-24

employer supplies to the special employer an employee and the general employer pays or is

3-25

obligated to pay the wages or salaries of the supplied employee, then, notwithstanding the fact

3-26

that direction and control is in the special employer and not the general employer, the general

3-27

employer, if it is subject to the provisions of the Workers' Compensation Act or has accepted that

3-28

Act, shall be deemed to be the employer as set forth in subdivision (5) of this section and both the

3-29

general and special employer shall be the employer for purposes of sections 28-29-17 and 28-29-

3-30

18.

3-31

      (iv) Effective January 1, 2003, whenever a general employer enters into a contract or

3-32

arrangement with a special employer to supply an employee or employees for work, the special

3-33

employer shall require an insurer generated insurance coverage certification, on a form prescribed

3-34

by the department, demonstrating Rhode Island workers' compensation and employer's liability

4-1

coverage evidencing that the general employer carries workers' compensation insurance with that

4-2

insurer with no indebtedness for its employees for the term of the contract or arrangement. In the

4-3

event that the special employer fails to obtain and maintain at policy renewal and thereafter this

4-4

insurer generated insurance coverage certification demonstrating Rhode Island workers'

4-5

compensation and employer's liability coverage from the general employer, the special employer

4-6

is deemed to be the employer pursuant to the provisions of this section. Upon the cancellation or

4-7

failure to renew, the insurer having written the workers' compensation and employer's liability

4-8

policy shall notify the certificate holders and the department of the cancellation or failure to

4-9

renew and upon notice, the certificate holders shall be deemed to be the employer for the term of

4-10

the contract or arrangement unless or until a new certification is obtained.

4-11

      (7) (i) "Injury" means and refers to personal injury to an employee arising out of and in

4-12

the course of his or her employment, connected and referable to the employment.

4-13

      (ii) An injury to an employee while voluntarily participating in a private, group, or

4-14

employer-sponsored carpool, vanpool, commuter bus service, or other rideshare program, having

4-15

as its sole purpose the mass transportation of employees to and from work shall not be deemed to

4-16

have arisen out of and in the course of employment. Nothing in the foregoing provision shall be

4-17

held to deny benefits under chapters 29 -- 38 and chapter 47 of this title to employees such as

4-18

drivers, mechanics, and others who receive remuneration for their participation in the rideshare

4-19

program. Provided, that the foregoing provision shall not bar the right of an employee to recover

4-20

against an employer and/or driver for tortious misconduct.

4-21

      (8) "Maximum medical improvement" means a point in time when any medically

4-22

determinable physical or mental impairment as a result of injury has become stable and when no

4-23

further treatment is reasonably expected to materially improve the condition. Neither the need for

4-24

future medical maintenance nor the possibility of improvement or deterioration resulting from the

4-25

passage of time and not from the ordinary course of the disabling condition, nor the continuation

4-26

of a pre-existing condition precludes a finding of maximum medical improvement. A finding of

4-27

maximum medical improvement by the workers' compensation court may be reviewed only

4-28

where it is established that an employee's condition has substantially deteriorated or improved.

4-29

      (9) "Physician" means medical doctor, surgeon, dentist, licensed psychologist,

4-30

chiropractor, osteopath, podiatrist, or optometrist, as the case may be.

4-31

      (10) "Suitable alternative employment" means employment or an actual offer of

4-32

employment which the employee is physically able to perform and will not exacerbate the

4-33

employee's health condition and which bears a reasonable relationship to the employee's

4-34

qualifications, background, education, and training. The employee's age alone shall not be

5-1

considered in determining the suitableness of the alternative employment.

5-2

      (11) "Independent contractor" except as provided in section 28-29-7.1 means a person

5-3

who has filed a notice of designation as independent contractor with the director pursuant to

5-4

section 28-29-17.1 or as otherwise found by the workers' compensation court according to the

5-5

provisions of section 28-29-17.2.

5-6

     28-29-6.1. Secondary provision of workers' compensation insurance. -- (a) Whenever

5-7

a general contractor or a construction manager enters into a contract with a subcontractor for

5-8

work to be performed in Rhode Island, the general contractor or construction manager shall at all

5-9

times require written documentation evidencing that the subcontractor carries workers'

5-10

compensation insurance with no indebtedness for its employees for the term of the contract or is

5-11

an independent contractor pursuant to the provisions of section sections 28-29-17.1 and 28-29-

5-12

17.2. In the event that the general contractor or construction manager fails to obtain the written

5-13

documentation from the subcontractor, the general contractor or construction manager shall be

5-14

deemed to be the employer pursuant to provisions of section 28-29-2.

5-15

      (b) For the purposes of this section, "construction manager" means an individual

5-16

corporation, partnership, or joint venture or other legal entity responsible for supervising and

5-17

controlling all aspects of construction work to be performed on the construction project, as

5-18

designated in the project documents, in addition to the possibility of performing some of the

5-19

construction services itself. For the purposes of this section, the construction manager need have

5-20

no contractual involvement with any of the parties to the construction project other than the

5-21

owner, or may contract directly with the trade contractors pursuant to its agreement with the

5-22

owner.

5-23

      (c) This section only applies to a general contractor, subcontractor, or construction

5-24

manager deemed an employer subject to the provisions of Chapters 29 -- 38 of this title, as

5-25

provided in section 28-29-6.

5-26

      (d) Whenever the workers' compensation insurance carrier is obligated to pay workers'

5-27

compensation benefits to the employee of an uninsured subcontractor, the workers' compensation

5-28

insurance carrier shall have a complete right of indemnification to the extent benefits are paid

5-29

against either the uninsured subcontractor, uninsured general contractor or uninsured construction

5-30

manager.

5-31

     28-29-17.1. Notice of designation as independent contractor. -- (a) A person will not

5-32

be considered an "independent contractor" unless that person files a notice of designation

5-33

registers pursuant to section 42-16.1-5.1 with the director, consistent with rules and regulations

5-34

established by the director, in writing, on a form provided by the director, that the person is an

6-1

"independent contractor." The filing of the notice of designation the registration shall be a

6-2

presumption of "independent contractor" status but shall not preclude a finding of independent

6-3

contractor status by the court when the notice is not filed with the director (when the registration

6-4

is not filed with the director according to the provisions of section 28-29-17.2). That designation

6-5

registration shall continue in force and effect unless the person withdraws that designation

6-6

registration by filing a notice with the director, in writing, on a form provided by the director, that

6-7

the person is no longer an "independent contractor." Any designation registration or withdrawal

6-8

of designation registration form shall be deemed public information and the director shall furnish

6-9

copies or make available electronically the forms and designations, registrations, upon written

6-10

request, to any employer or insurer or its authorized representative.

6-11

      (b) The workers' compensation court may, upon petition of an employee, the dependents

6-12

of a deceased employee or any other party in interest at any time, vacate any "notice of

6-13

designation" registration if the "notice of designation" registration has been improperly procured.

6-14

      (c) The provisions of subsections (a) and (b) of this section shall only apply to injuries

6-15

occurring on and after January 1, 2001.

6-16

     SECTION 2. Chapter 28-29 of the General Laws entitled "Workers' Compensation -

6-17

General Provisions" is hereby amended by adding thereto the following section:

6-18

     28-29-17.2. Employee presumption; independent contractor exception. – (a) For the

6-19

purposes of Chapter 28 – 38 of this title, a person performing any service, except as authorized

6-20

under those chapters, shall be presumed an “employee” unless:

6-21

     (1) The person is free from control and direction in connection with the performance of

6-22

the service, both under his or her contract for the performance of service and in fact; and either

6-23

     (2) The service is performed either outside the usual course of the business for which the

6-24

service is performed or outside of all the places of business of the enterprise for which the service

6-25

is performed; or

6-26

     (3) The person is customarily engaged in an independently established trade, occupation,

6-27

profession or business of the same nature as that involved in the service performed.

6-28

     (b) The failure to withhold federal or state income taxes or to pay unemployment

6-29

compensation contributions or workers compensation premiums with respect to a person’s wages

6-30

shall not be considered in making a determination under this section.

6-31

     (c) Any entity or person failing to treat a person as an employee according to this chapter

6-32

shall be subject to sanctions and penalties as provided in section 28-33-17.3.

6-33

     SECTION 3. Section 28-36-15 of the General Laws in Chapter 28-36 entitled "Workers'

6-34

Compensation - Insurance" is hereby amended to read as follows:

7-1

     28-36-15. Penalty for failure to secure compensation -- Personal liability of

7-2

corporate officers. -- (a) Any employer required to secure the payment of compensation under

7-3

chapters 29 -- 38 of this title who knowingly fails to secure that compensation shall be guilty of a

7-4

felony and shall be subject to imprisonment for up to two (2) years. In addition to the foregoing,

7-5

the employer shall be subject to a civil penalty punished by a fine not to exceed one thousand

7-6

dollars ($1,000) for each day of noncompliance with the requirements of this title. The director

7-7

shall institute any and all reasonable measures to comprehensively monitor, investigate, and

7-8

otherwise discover all employer noncompliance with this section and shall establish rules and

7-9

regulations governing these measures. Each day shall constitute a separate and distinct offense for

7-10

calculation of the penalty. Where that employer is a corporation the president, vice president,

7-11

secretary, treasurer, and other officers of the corporation, shall be severally liable for the fine,

7-12

penalty or imprisonment as provided in this section for the failure of that corporation to secure the

7-13

payment of compensation. The president, vice president, secretary, treasurer, and other officers of

7-14

the corporation shall also be severally personally liable, jointly with the corporation for any

7-15

compensation or other benefit which may accrue under those chapters in respect to any injury

7-16

which may occur to any employee of that corporation while it fails to secure the payment of

7-17

compensation as required by those chapters.

7-18

      (b) Where the employer is a limited liability company, the managers and managing

7-19

members who knowingly fail to secure the payment of compensation under chapters 29 -- 38 of

7-20

this title shall be guilty of a felony and shall be subject to imprisonment for up to two (2) years.

7-21

The managers and managing members shall also be severally liable for the fine, penalty or

7-22

imprisonment as provided in this section for the failure of that company to secure the payment of

7-23

compensation. The managers and managing members shall be severally personally liable, jointly

7-24

with the company, for any compensation or other benefit which may accrue under those chapters

7-25

in respect to any injury which may occur to any employee of that company while it fails to secure

7-26

the payment of compensation as required by those chapters.

7-27

      (c) Where the employer is a partnership, or a registered limited liability partnership, the

7-28

partners who knowingly fail to secure the payment of compensation under chapters 29 -- 38 of

7-29

this title shall be guilty of a felony and shall be subject to imprisonment for up to two (2) years.

7-30

The partners shall also be severally liable for the fine, penalty, or imprisonment as provided in

7-31

this section for the failure of that partnership to secure the payment of compensation. The partners

7-32

shall be severally personally liable, jointly with the partnership, for any compensation or other

7-33

benefit which may accrue under those chapters in respect to any injury which may occur to any

7-34

employee of that partnership while it fails to secure the payment as required by those chapters.

8-1

      (d) Where the employer is a limited partnership or a registered limited liability limited

8-2

partnership, the general partners who knowingly fail to secure the payment of compensation

8-3

under chapters 29 -- 38 of this title shall be guilty of a felony and shall be subject to

8-4

imprisonment for up to two (2) years. The general partners shall also be severally liable for the

8-5

fine, penalty or imprisonment as provided in this section for the failure of that limited partnership

8-6

to secure the payment of compensation. The general partners shall be severally personally liable,

8-7

jointly with the limited partnership, for any compensation or other benefit which may accrue

8-8

under those chapters in respect to any injury which may occur to any employee of that partnership

8-9

while it fails to secure the payment of compensation as required by those chapters.

8-10

      (e) All criminal actions for any violation of this section shall be prosecuted by the

8-11

attorney general. The attorney general shall prosecute actions to enforce the payment of penalties

8-12

and fines at the request of the director. The workers' compensation court shall have jurisdiction

8-13

over all civil actions filed pursuant to this section.

8-14

      The court shall consider the following factors in assessing a civil penalty: gravity of

8-15

offense, resources of the employer, effect of the penalty on employees of the company, the reason

8-16

for the lapse in coverage, and the recommendation of the director. Following a review of the

8-17

factors set forth above, the court may suspend all or a part of a civil penalty or shall establish a

8-18

time table for compliance with any court order.

8-19

      (f) (1) As soon as practicable after the director receives notice of noncompliance under

8-20

this section, the director shall determine whether cause exists for the imposition of a civil penalty.

8-21

Unless the director determines that the noncompliance was unintentional or the result of a clerical

8-22

error and subject to the administrative proceedings under subsection (g) of this section, the

8-23

director shall commence an action in the workers' compensation court to assess a civil penalty

8-24

against the employer as set forth in subsection (a) of this section and shall refer the matter to the

8-25

attorney general for prosecution of criminal charges.

8-26

      (2) The director shall bring a civil action in the workers' compensation court to collect all

8-27

payments and penalties ordered and not paid. All civil actions for any violations of this chapter or

8-28

of any of the rules or regulations promulgated by the director, or for the collection of payments in

8-29

accordance with section 28-37-13, 28-33-17.3(a)(2) or 28-33-17.3(a)(3) or civil penalties under

8-30

this chapter, shall be prosecuted by any qualified member of the Rhode Island bar whom the

8-31

director may designate, in the name of the director, and the director is exempt from giving surety

8-32

for costs in any proceedings.

8-33

      (g) In the case of unintentional noncompliance or noncompliance resulting from clerical

8-34

error where the uninsured period is less than one year from the date of discovery and there were

9-1

no employees injured during the uninsured period and the employer has not been subject to any

9-2

other findings of noncompliance with these chapters, the director shall assess an administrative

9-3

penalty of not less than the estimated annual workers' compensation insurance premium for that

9-4

employer and not more than triple that amount. Any party has the right to appeal the orders of the

9-5

director. Such appeal shall be to the workers' compensation court in the first instance and

9-6

thereafter from the workers' compensation court to the Rhode Island supreme court in accordance

9-7

with section 28-35-30.

9-8

      (h) The director shall collect all payments under this chapter under the rules and

9-9

regulations that may be set forth by the director. All fines collected pursuant to this section shall

9-10

be deposited to a restricted receipt account to be administered by the director of the department of

9-11

labor and training in his or her sole discretion to carry out chapters 29 -- 38 of this title.

9-12

      (i) (1) In that the operation of a commercial enterprise without the required workers'

9-13

compensation insurance is a crime and creates a clear and present danger of irreparable harm to

9-14

employees who are injured while the employer is uninsured, the director shall suspend the

9-15

operation of the business immediately and until workers' compensation and employers' liability

9-16

insurance is secured consistent with these chapters. The director shall lift the suspension upon

9-17

receipt of satisfactory proof of insurance and evidence sufficient to satisfy the director that the

9-18

employer is in full compliance with these chapters. Any party has the right to appeal the

9-19

suspension to the workers' compensation court where the matter shall proceed pursuant to the

9-20

workers' compensation court rules of procedure.

9-21

      (2) In the event that the employer shall fail to comply with the director's order of

9-22

suspension, the director may apply immediately to the workers' compensation court for an order

9-23

directing the employer to comply with the director's prior orders.

9-24

      (3) Actions filed with the workers' compensation court pursuant to this section shall not

9-25

be subject to a pretrial conference in accordance with section 28-35-20 but shall be assigned

9-26

consistent with the workers' compensation court rules of procedure.

9-27

      (4) Interest shall accrue on unpaid penalties during the pendency of any appeal at the rate

9-28

per annum provided in section 9-21-10.

9-29

      (j) These provisions shall take effect upon passage except section 28-29-2(6)(iv) which

9-30

shall take effect on January 1, 2006.

9-31

     (k) The department of attorney general, with the assistance of any law enforcement

9-32

agency in the state shall, at the request of the director, render any assistance necessary to carry

9-33

out the provisions of this section, including, but not limited to, preventing any employee or other

9-34

persons from remaining at a place of employment or job site after a stop work order has taken

10-1

effect.

10-2

      (l) Neither the state of Rhode Island nor any of its political subdivisions shall enter into

10-3

any contract for the performance of public work until acceptable evidence of compliance with the

10-4

insurance requirements of this chapter have been presented to the contracting authority.

10-5

      (m) Any person or firm that loses a competitive bid for a contract including, but not

10-6

limited to, construction, repair, remodeling, alteration, conversion, modernization, replacement or

10-7

renovation of a building, roadway or structure may bring an action for damages against another

10-8

person who is awarded the contract for which the bid was made, if the other person was awarded

10-9

the contract because of cost advantages achieved by violating the provisions of this chapter or by

10-10

the deliberate misclassification of employees for the purpose of avoiding full payment of

10-11

workers’ compensation insurance premiums.

10-12

     (1) A person or firm bringing an action under this section must establish a violation of

10-13

said subsection or chapters by a preponderance of the evidence. Upon establishing that the

10-14

violation occurred, the person bringing the action shall recover, as liquidated damages, ten

10-15

percent (10%) of the total amount bid on the contract, or fifteen thousand dollars ($15,000),

10-16

whichever is lesser.

10-17

     (2) An action under this subsection shall be commenced within one year from the date

10-18

when the contract is awarded.

10-19

     (3) No person or firm shall be allowed to recover any damages under this subsection if

10-20

they were in violation of this section at the time of making the bid on the contract.

10-21

     (4) In any action under this section, the prevailing party shall be entitled to an award of

10-22

reasonable attorneys fees.

10-23

     (n) In addition to being subject to the civil penalties herein provided, an employer who

10-24

fails to provide for insurance or self insurance as required by this chapter or knowingly

10-25

misclassifies employees, to avoid higher premium rates, will be immediately debarred from

10-26

bidding or participating in any state or municipal funded contracts for a period of three (3) years

10-27

and shall when applicable be subject to other additional penalties provided for in this chapter.

10-28

     SECTION 4. Section 28-42-7 of the General Laws in Chapter 28-42 entitled

10-29

"Employment Security - General Provisions" is hereby amended to read as follows:

10-30

     28-42-7. Independent contractor and employee distinguished Employee

10-31

presumption -- Independent contractor exception. -- The determination of independent

10-32

contractor or employee status for purposes of chapters 42 -- 44 of this title shall be the same as

10-33

those factors used by the Internal Revenue Service in its code and regulations. (a) For the

10-34

purposes of Chapter 42 – 44 of this title, except as provided in section 28-42-8, a person

11-1

performing any service, except as authorized under those chapters, shall be presumed an

11-2

“employee” unless:

11-3

     (1) The person is free from control and direction in connection with the performance of

11-4

the service, both under his or her contract for the performance of service and in fact; and either

11-5

     (2) The service is performed either outside the usual course of the business for which the

11-6

service is performed or outside of all the places of business of the enterprise for which the service

11-7

is performed; or

11-8

     (3) The person is customarily engaged in an independently established trade, occupation,

11-9

profession or business of the same nature as that involved in the service performed.

11-10

     (b) The failure to withhold federal or state income taxes or to pay unemployment

11-11

compensation contributions or workers’ compensation premiums with respect to a person’s wages

11-12

shall not be considered in making a determination under this section.

11-13

     (c) Any entity or person failing to treat a person as an employee according to this chapter

11-14

shall be subject to sanctions and penalties as provided in section 28-42-66.

11-15

     SECTION 5. Section 42-16.1-2 of the General Laws in Chapter 42-16.1 entitled

11-16

"Department of Labor and Training" is hereby amended to read as follows:

11-17

     42-16.1-2. Functions of director. -- The director of labor and training shall:

11-18

      (1) Have all the powers and duties formerly vested by law in the director of labor with

11-19

regard to factory inspectors and steam boiler inspectors, and such other duties as may be by law

11-20

conferred upon the department;

11-21

      (2) Administer the labor laws of this state concerning women and children and be

11-22

responsible for satisfactory working conditions of women and children employed in industry in

11-23

this state by a division in the department which shall be known as the division of labor standards;

11-24

      (3) Administer the act relating to state wage payment and wage collection;

11-25

      (4) Have all of the powers and duties formerly vested in the director of the department of

11-26

labor and administer those responsibilities set forth in chapters 29 -- 38, inclusive, of title 28;

11-27

      (5) Have all the powers and duties formerly vested by law in the director of employment

11-28

and training and administer those responsibilities set forth in chapters 39 -- 44, inclusive, of title

11-29

28 and chapter 102 of title 42.

11-30

     (6) Provide to other requesting state departments or agencies any labor related

11-31

information, records or documents, concerning employee misclassification, they deem necessary

11-32

to review in the fulfillment of their statutory duties, responsibilities and mission, unless deemed

11-33

confidential by federal law.

12-34

     SECTION 6. Chapter 42-16.1 of the General Laws entitled "Department of Labor and

12-35

Training" is hereby amended by adding thereto the following sections:

12-36

     42-16.1-5.1. Registration of independent contractors. – (a) Any person, firm,

12-37

corporation or business, identifying itself or themselves as an independent contactor; or firm,

12-38

corporation or business, hiring an entity identifying itself as an independent contractor, shall

12-39

annually file a notice of registration with the director pursuant to section 28-29-17.1. The

12-40

registration form shall identify the registrant as an independent contractor or hiring entity of an

12-41

independent contractor. Provided, however, that any independent contractor who has a valid

12-42

registration at the time of effective date of this section shall be exempt from the provisions of this

12-43

section.

12-44

     (1) The annual registration shall be a public record, on a form provided by the director.

12-45

      (2) Any person or corporation failing to register with the director under the provisions of

12-46

this section shall be guilty of a misdemeanor and fined not less than five hundred dollars ($500)

12-47

nor more than one thousand dollars ($1,000) for each offense, or by imprisonment for not less

12-48

than ten (10) days nor more than ninety (90) days or by both such fine and imprisonment. Each

12-49

failure to register or withhold shall be considered a separate offense.

12-50

     (3) The director shall establish such rules and regulations as necessary to accomplish the

12-51

purpose of the statute.

12-52

     (b) The requirements of subsection (a) shall not apply to property owners in residential

12-53

construction projects which comprise less than four (4) units.

12-54

     42-16.1-5.2. Notice of ramifications of misclassification of employees as independent

12-55

contractors. – (a) Employers classification of employees as independent contractors presents

12-56

severe economic consequences to the affected employee, to the state and federal government, and

12-57

to the workers’ compensation system. A significant number of hiring entities are improperly

12-58

classifying employees as “independent contractors” either due to a lack of understanding or

12-59

knowingly to avoid legal obligations under federal and state labor and tax laws governing

12-60

payment of wages, unemployment insurance, workers’ compensation, and income and social

12-61

security taxation. The state acknowledges the need to educate workers, the business community

12-62

and the public on law and ramifications of willful or negligent misclassification of employees.

12-63

     (b) The director shall provide for the placement of information on any poster required

12-64

under the federal Fair Labor Standards Act, informing all workers and independent contractors of

12-65

their right to be properly classified and the specific detrimental consequences of the

12-66

misclassifications of their status. The director shall adopt regulations to implement the provisions

12-67

of this section so that all interested parties are properly notified and educated on this critical

12-68

classification issue.

13-1

     SECTION 7. Sections 44-1-2 of the General Laws in Chapter 44-1 entitled "State Tax

13-2

Officials" is hereby amended to read as follows:

13-3

     44-1-2. Powers and duties of tax administrator. -- The tax administrator is required:

13-4

      (1) To assess and collect all taxes previously assessed by the division of state taxation in

13-5

the department of revenue and regulation, including the franchise tax on domestic corporations,

13-6

corporate excess tax, tax upon gross earnings of public service corporations, tax upon interest

13-7

bearing deposits in national banks, the inheritance tax, tax on gasoline and motor fuels, and tax on

13-8

the manufacture of alcoholic beverages;

13-9

      (2) To assess and collect the taxes upon banks and insurance companies previously

13-10

administered by the division of banking and insurance in the department of revenue and

13-11

regulation, including the tax on foreign and domestic insurance companies, tax on foreign

13-12

building and loan associations, deposit tax on savings banks, and deposit tax on trust companies;

13-13

      (3) To assess and collect the tax on pari-mutuel or auction mutuel betting, previously

13-14

administered by the division of horse racing in the department of revenue and regulation.

13-15

      (4) [Deleted by P.L. 2006, ch. 246, art. 38, section 10].

13-16

      (5) To assess and collect the monthly surcharges that are collected by telecommunication

13-17

services providers pursuant to section 39-21.1-14 and are remitted to the division of taxation.

13-18

      (6) To audit, assess and collect all unclaimed intangible and tangible property pursuant

13-19

to chapter 21.1 of title 33.

13-20

     (7) To provide to other requesting state departments or agencies any tax information,

13-21

records or documents, concerning employee misclassification, they deem necessary to review in

13-22

the fulfillment of their statutory duties, responsibilities and mission, unless deemed confidential

13-23

by federal law.

13-24

     SECTION 8. This act shall take effect on January 1, 2013.

=======

LC01547

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO LABOR AND LABOR RELATIONS - UNDERGROUND ECONOMY

COMMISSION

***

14-1

     This act would address the issue of employee and independent contractor classification. It

14-2

would clarify the definition of employee in the workers’ compensation and unemployment

14-3

benefits context, would permit the sharing of information by and between state departments to

14-4

encourage enforcement. In addition, it would expand the tools which detect and limit the

14-5

misclassification of employees. Education of the labor and business communities on the issue and

14-6

its ramifications is mandated. Finally, it would require registration with the department of labor

14-7

and training of all independent contractors and the entities that hire them.

14-8

     This act would take effect on January 1, 2013.

=======

LC01547

=======