2014 -- S 2409 SUBSTITUTE A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO LABOR AND LABOR RELATIONS -- EMPLOYEE CLASSIFICATION

     Introduced By: Senators McCaffrey, and Lombardi

     Date Introduced: February 27, 2014

     Referred To: Senate Labor

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 28-14-19 of the General Laws in Chapter 28-14 entitled "Payment

of Wages" is hereby amended to read as follows:

     28-14-19. Enforcement powers and duties of director of labor and training. -- (a) It

shall be the duty of the director to insure compliance with the provisions of this chapter 28-14 and

28-12. The director or his or her designee may investigate any violations thereof, institute or

cause to be instituted actions for the collection of wages and institute action for penalties or other

relief as provided for within and pursuant to those chapters. The director or his or her authorized

representatives are empowered to hold hearings and he or she shall cooperate with any employee

in the enforcement of a claim against his or her employer in any case whenever, in his or her

opinion, the claim is just and valid.

      (b) Upon receipt of a complaint or conducting an inspection under applicable law, the

director or his or her appropriate departmental designee is authorized to investigate to determine

compliance with the chapters 28-12 and/or 28-14.

      (c) With respect to all complaints deemed just and valid, the director or his or her

designee shall order a hearing thereon at a time and place to be specified, and shall give notice

thereof, together with a copy of the complaint or the purpose thereof, or a statement of the facts

disclosed upon investigation, which notice shall be served personally or by mail on any person,

business, corporation, or entity of any kind affected thereby. The hearing shall be scheduled

within thirty (30) days of service of a formal complaint as provided herein. The person, business,

corporation, or entity shall have an opportunity to be heard in respect to the matters complained

of at the time and place specified in the notice. The hearing shall be conducted by the director or

his or her designee. The hearing officer in the hearing shall be deemed to be acting in a judicial

capacity, and shall have the right to issue subpoenas, administer oaths, and examine witnesses.

The enforcement of a subpoena issued under this section shall be regulated by Rhode Island civil

practice law and rules. The hearing shall be expeditiously conducted and upon such hearing the

hearing officer shall determine the issues raised thereon and shall make a determination and enter

an order within thirty (30) days of the close of the hearing, and forthwith serve a copy of the

order, with a notice of the filing thereof, upon the parties to the proceeding, personally or by mail.

In the event that any person and/or entity asserts as a related claim or defense of a formal

investigation, complaint, and/or claim, the absence of an employer-employee relationship or that

the agent or operative employed by the contractor is an independent contractor, the director of the

department of labor and training or his or her designee shall refer the matter forthwith to the

Rhode Island workers' compensation court for an evidentiary hearing and determination of

employment status in accordance with § 28-30-13(c). The order shall dismiss the complaint or

direct payment of any wages and/or benefits found to be due and/or award such other appropriate

relief or penalties authorized under chapter 28-12 and/or 28-14, and the order may direct payment

of reasonable attorneys' fees and costs to the complaining party. Interest at the rate of twelve

percent (12%) per annum shall be awarded in the order from the date of the nonpayment to the

date of payment.

      (d) The order shall also require payment of a further sum as a civil penalty in an amount

up to two (2) times the total wages and/or benefits found to be due, exclusive of interest, which

shall be shared equally between the department and the aggrieved party. In determining the

amount of any penalty to impose, the director or his or her designee shall consider the size of the

employer's business, the good faith of the employer, the gravity of the violation, the previous

violations and whether or not the violation was an innocent mistake or willful.

      (e) The director may institute any action to recover unpaid wages or other compensation

or obtain relief as provided under this section with or without the consent of the employee or

employees affected.

      (f) No agreement between the employee and employer to work for less than the

applicable wage and/or benefit rate or to otherwise work under and/or conditions in violation of

applicable law is a defense to an action brought pursuant to this section.

      (g) The director shall notify the contractors' registration board of any order issued or any

determination hereunder that an employer has violated chapters 28-12, 28-14 and/or 37-13. The

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director shall notify the tax administrator of any determination hereunder that may affect liability

for an employer's payment of wages and/or payroll taxes.

     SECTION 2. Section 28-30-13 of the General Laws in Chapter 28-30 entitled "Workers'

Compensation Court" is hereby amended to read as follows:

     28-30-13. Controversies submitted to court. -- (a) Any controversy over which the

workers' compensation court has jurisdiction in accordance with chapters 29 -- 38 and chapter 53

of this title, including compensation, reasonableness of medical and hospital bills, degree of

functional impairment and/or disability, a dispute between an insurance carrier and an employer

under a workers' compensation insurance contract, except disputes under the jurisdiction of the

workers' compensation appeals board established pursuant to section 27-9-29, failure of an

employer to secure the payment of compensation under chapters 29 -- 38 and chapter 53 of this

title and any controversy in which the state or any of its political subdivisions is a party, and

appeals from an order of the retirement board pursuant to Rhode Island general law section 45-

21.2-9 shall be submitted to the court in the manner provided in chapters 33 and 35 of this title.

      (b) Disputes between an insurance carrier and an employer under a workers'

compensation insurance contract shall not be subject to a pretrial conference in accordance with

section 28-35-20, but shall be assigned consistent with the rules and regulations of the workers'

compensation court.

     (c) Where any person and/or entity asserts as a related claim or defense of a formal

investigation, complaint, and/or claim to the director of the department of labor and training or

his or her designee, pursuant to §§ 28-14-19, 28-40-11 and 37-13-14, the absence of an employer-

employee relationship or the existence of an independent contractor relationship, the director of

the department of labor and training or his or her designee shall refer the matter to the workers'

compensation court for an evidentiary hearing and determination of employment status. Such

disputes shall not be subject to a pretrial conference in accordance with § 28-35-20. Rather, the

court shall assign the matter for trial within twenty-one (21) days of the date on which the matter

is docketed at the court. The judge to whom the matter is assigned shall hear and decide all

questions of law and fact relating to the disputed employment status and shall render a decision

regarding the determination of employment in accordance with the Internal Revenue Service test

as amended. The judge's decision shall be based on, but is not limited to the following criteria:

     (1) The instructions the business gives to the worker;

     (2) The training the business gives to the worker;

     (3) The extent to which the worker has unreimbursed business expenses;

     (4) The extent of the worker’s investment;

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     (5) The extent to which the worker makes services available to the relevant market;

     (6) How the business pays the worker;

     (7) The extent to which the worker can realize a profit or loss;

     (8) Whether written documents exist to describe the relationship;

     (9) Whether the business provides the worker with benefits;

     (10) The duration of the relationship;

     (11) The extent to which the services performed are a key aspect of the regular and

routine operation of the business.

     The judge shall entry an order reflecting his or her findings and decisions.

     Any party aggrieved by the entry of the order by a judge relating to employment status

under this section may appeal said order to the appellate division pursuant to § 28-35-28. The

workers’ compensation court shall establish a special calendar to expedite the appeal of these

factual determinations and shall assign the matters to argument on such calendar within thirty

(30) days of the date on which the appeal is perfected. Upon the entry of a final order of the court,

the matter shall be remanded to the department of labor and training for further proceedings

consistent with the court’s order.

     (d) Judicial review of regulations. Any interested person who may be aggrieved by any

order issued by the director under this chapter may obtain the review of the order in the superior

court for Providence and Bristol counties by filing in the court within thirty (30) days after the

date of publication of the order a written petition praying that the order be modified or set aside.

A copy of the petition shall be served upon the director of labor and training. The findings of

facts shall be conclusive upon the court. The court shall determine whether the order or regulation

is in accordance with law.

     (e) Hearings in the superior court on all appeals taken under the provisions of this chapter

shall take precedence over all matters, except matters of the same character. The jurisdiction of

the court shall be exclusive and its judgment and decree shall be final except that the judgment

and decree shall be subject to review by the supreme court.

     (f) The commencement of proceedings under subsection (a) of this section shall not

operate as a stay of wage order or of an administrative regulation issued under the provisions of

this chapter.

     SECTION 3. Section 28-40-11 of the General Laws in Chapter 28-40 entitled

"Temporary Disability Insurance - Contributions" is hereby amended to read as follows:

     28-40-11. Determination of unreported contributions due. -- If an employer for any

reporting period fails to make any report used for the purpose of determining the amount of

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contributions payable under chapters 39 -- 41 of this title at the time and in the manner required

by the prescribed rules and regulations, or if those reports when filed are incorrect or insufficient,

and the employer fails to file a corrected or sufficient report within twenty (20) days after the

director has required it by written notice, the director shall determine on the basis of such

information as the director may be able to obtain, the amount of contributions due from that

employer, and the director shall give written notice to any employer of the amount of

contributions so determined. That determination shall finally and irrevocably fix the amount of

contributions due unless the employer, within twenty (20) days after the giving of that notice,

applies to the board of review for a hearing, or unless the director on his or her own volition

reduces the amount. In the event that any person and/or entity asserts as a related claim or defense

of a formal investigation, complaint, and/or claim, the absence of an employer-employee

relationship or that the agent or operative employed by the contractor is an independent

contractor, the director of the department of labor and training or his or her designee shall refer

the matter forthwith to the Rhode Island workers' compensation court for an evidentiary hearing

and determination of employment status in accordance with § 28-30-13(c).

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

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

     28-42-7. Independent contractor and employee distinguished. -- The determination of

independent contractor or employee status for purposes of chapters 42 -- 44 of this title shall be

made by the Rhode Island workers' compensation court in accordance with § 28-30-13(c) the

same as those factors used by the Internal Revenue Service in its code and regulations.

     SECTION 5. Section 37-13-14.1 of the General Laws in Chapter 37-13 entitled "Labor

and Payment of Debts by Contractors" is hereby amended to read as follows:

     37-13-14.1. Enforcement -- Hearings. -- (a) Before issuing an order or determination,

the director of labor and training shall order a hearing thereon at a time and place to be specified,

and shall give notice thereof, together with a copy of the complaint or the purpose thereof, or a

statement of the facts disclosed upon investigation, which notice shall be served personally or by

mail on any person, firm, or corporation affected thereby. The person, firm, or corporation shall

have an opportunity to be heard in respect to the matters complained of at the time and place

specified in the notice, which time shall be not less than five (5) days from the service of the

notice personally or by mail. The hearing shall be held within ten (10) days from the order of

hearing. The hearing shall be conducted by the director of labor and training or his or her

designee. The hearing officer in the hearing shall be deemed to be acting in a judicial capacity,

and shall have the right to issue subpoenas, administer oaths, and examine witnesses. The

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enforcement of a subpoena issued under this section shall be regulated by Rhode Island civil

practice law and rules. The hearing shall be expeditiously conducted and upon such hearing the

hearing officer shall determine the issues raised thereon and shall make a determination and enter

an order within ten (10) days of the close of the hearing, and forthwith serve a copy of the order,

with a notice of the filing thereof, upon the parties to the proceeding, personally or by mail. In the

event that any person and/or entity asserts as a related claim or defense of a formal investigation,

complaint, and/or claim, the absence of an employer-employee relationship or that the agent or

operative employed by the contractor is an independent contractor, the director of the department

of labor and training or his or her designee shall refer the matter forthwith to the Rhode Island

workers' compensation court for an evidentiary hearing and determination of employment status

in accordance with § 28-30-13(c). The order shall dismiss the charges or direct payment of wages

or supplements found to be due, including interest at the rate of twelve percentum percent (12%)

per annum from the date of the underpayment to the date of payment, and may direct payment of

reasonable attorney's fees and costs to the complaining party.

      (b) In addition to directing payment of wages or supplements including interest found to

be due, the order shall also require payment of a further sum as a civil penalty in an amount up to

three times the total amount found to be due. Further, if the amount of salary owed to an

employee pursuant to this chapter but not paid to the employee in violation of thereof exceeds

five thousand dollars ($5,000), it shall constitute a misdemeanor and shall be referred to the office

of the attorney general. The misdemeanor shall be punishable for a period of not more than one

year in prison and/or fined not more than one thousand dollars ($1,000). In assessing the amount

of the penalty, due consideration shall be given to the size of the employer's business, the good

faith of the employer, the gravity of the violation, the history of previous violations and the

failure to comply with recordkeeping or other nonwage requirements. The surety of the person,

firm, or corporation found to be in violation of the provisions of this chapter shall be bound to

pay any penalties assessed on such person, firm, or corporation. The penalty shall be paid to the

department of labor and training for deposit in the state treasury; provided, however, it is hereby

provided that the general treasurer shall establish a dedicated "prevailing wages enforcement

fund" for the purpose of depositing the penalties paid as provided herein. There is hereby

appropriated to the annual budget of the department of labor and training the amount of the fund

collected annually under this section, to be used at the direction of the director of labor and

training for the sole purpose of enforcing prevailing wage rates as provided in this chapter.

      (c) For the purposes of this chapter, each day or part thereof of violation of any provision

of this chapter by a person, firm, or corporation, whether the violation is continuous or

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intermittent, shall constitute a separate and succeeding violation.

      (d) In addition to the above, any person, firm, or corporation found in violation of any of

the provisions of this chapter by the director of labor and training, an awarding authority, or the

hearing officer, shall be ineligible to bid on or be awarded work by an awarding authority or

perform any such work for a period of no less than eighteen (18) months and no more than thirty-

six (36) months from the date of the order entered by the hearing officer. Once a person, firm, or

corporation is found to be in violation of this chapter, all pending bids with any awarding

authority shall be revoked, and any bid awarded by an awarding authority prior to the

commencement of the work shall also be revoked.

      (e) In addition to the above, any person, firm, or corporation found to have committed

two (2) or more willful violations in any period of eighteen (18) months of any of the provisions

of this chapter by the hearing officer, which violations are not arising from the same incident,

shall be ineligible to bid on or be awarded work by an awarding authority or perform any work

for a period of sixty (60) months from the date of the second violation.

      (f) The order of the hearing officer shall remain in full force and effect unless stayed by

order of the superior court.

      (g) The director of labor and training, awarding authority, or hearing officer shall notify

the bonding company of any person, firm, or corporation suspected of violating any section of

this chapter. The notice shall be mailed certified mail, and shall enumerate the alleged violations

being investigated.

      (h) In addition to the above, any person, firm, or corporation found to have willfully

made a false or fraudulent representation on certified payroll records shall be referred to the

office of the attorney general. The false or fraudulent representation shall be considered a

misdemeanor and shall be punishable for a period of not more than one year in prison and/or

fined one thousand dollars ($1,000). Further, any person, firm, or corporation found to have

willfully made a false or fraudulent representation on certified payroll records shall be required to

pay a civil penalty to the department of labor and training in an amount of no less than two

thousand dollars ($2,000) and not greater than fifteen thousand dollars ($15,000) per

representation.

     SECTION 6. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO LABOR AND LABOR RELATIONS -- EMPLOYEE CLASSIFICATION

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     This act would grant jurisdiction to the workers' compensation court to decide whether an

individual is an employee or an independent contractor in a number of various labor contexts.

     This act would take effect upon passage.

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