Title 28
Labor and Labor Relations

Chapter 14
Payment of Wages

§ 28-14-19.1. Misclassification of employees.

(a) The misclassification of a worker whether performing work as a natural person, business, corporation, or entity of any kind, as an independent contractor when the worker should be considered and paid as an employee shall be considered a violation of this chapter.

(b) Upon receipt by the department of a complaint alleging misclassification of a worker pursuant to this section, the department shall undertake an investigation using the factors consistent with federal regulations found in the Fair Labor Standards Act, 29 U.S.C. § 201 et seq.

(1) The department shall assign an investigatory team within the department to investigate and screen all complaints for general analysis and validity.

(2) As part of their investigation, the department’s investigatory team may conduct field audits of businesses to ascertain validity of complaints. In conducting these audits, the department’s investigatory team may investigate exclusively or with the assistance of the task force as established pursuant to chapter 156 of title 42.

(3)(i) The investigatory team shall make a determination as to whether it finds the complaint to be just and valid, or not, and shall report those findings to the director or the director’s designee. In instances where the department’s investigatory team deems a complaint is just and valid, and so reports, the alleged civil violation shall be adjudicated pursuant to the provisions of § 28-14-19 and this section.

(ii) In addition, in the event the investigatory team determines that an employer has misclassified an employee, the investigatory team shall report the matter to the director or designee with a recommendation that the matter be referred to the department of the attorney general for criminal prosecution. The investigatory team may include any specific, documented extenuating circumstances that the investigatory team believes would mitigate against a criminal prosecution. The director or designee shall review the investigatory team’s findings and consider its recommendations. The director or designee shall forward the matter to the department of the attorney general along with the director’s or designee’s recommendations as to whether to prosecute the matter criminally or not, along with any specific, documented extenuating circumstances that the director or designee believes would mitigate against a criminal prosecution.

(iii)(A) If the director or designee receives information indicating that any person has violated this chapter, the director or designee may investigate the matter and issue an order to show cause why the person should not be found in violation of this chapter.

(B) A person served with an order to show cause shall have a period of twenty (20) days from the date the order is served to file an answer in writing.

(C) If the person fails to file a timely and adequate answer to the order to show cause, the director or designee may, following notice and hearing, do any of the following:

(I) Petition a court of competent jurisdiction to issue a stop-work order as provided in this section; or

(II) Immediately assess penalties as provided for in this section.

(D) If, subsequent to issuing an order to show cause under this section, the director or designee finds probable cause that an employer has committed a criminal violation of this chapter, the director or designee shall refer the matter to the department of the attorney general for investigation or impose administrative penalties provided for under this section.

(E) A party that does not meet the definition of an “employer” in § 28-14-1, but which party intentionally contracts with an employer knowing the employer intends to misclassify employees in violation of this chapter, shall be subject to the same penalties, remedies, or other actions as the employer found to be in violation of this chapter.

(iv) Provided, the decision whether to prosecute a violation of this section as a criminal matter shall be made by the attorney general. In making this decision, the attorney general shall review and consider all recommendations and materials forwarded by the director or designee pursuant to this section.

(c) In determining the amount of any penalty imposed under this section, the director, or the director’s designee, shall consider the size of the employer’s business; the good faith of the employer; the gravity of the violation; the history of previous violations; and whether or not the violation was an innocent mistake or willful.

(d) A civil violation of this section may be adjudicated under § 28-14-19 and consolidated with any labor standards violation or under §§ 37-13-14.1 and 37-13-15 and consolidated with any prevailing wage violation.

(e) A violation of this section may be brought or adjudicated by any division of the department of labor and training.

(f) The department shall notify the contractors’ registration board and the tax administrator of any violation of this section.

(g) In addition to any other relief to which the department or an aggrieved party may be entitled for such a violation, the employer shall be liable for a civil penalty in an amount not less than one thousand five hundred dollars ($1,500) and not greater than three thousand dollars ($3,000) for each misclassified employee for a first offense and up to five thousand dollars ($5,000) for each misclassified employee for any subsequent offense, which shall be shared equally between the department and the aggrieved party.

(h) As it relates to the construction industry, all provisions of § 28-14-19.1 shall apply.

(i) Any employer who knowingly and willfully violates this section regarding misclassification of an employee in the construction industry shall be subject to the following penalties:

(1) Where the value does not exceed one thousand five hundred dollars ($1,500), upon a plea or a conviction, shall be guilty of a misdemeanor and be subject to imprisonment for a term not exceeding one year, or a fine of up to one thousand dollars ($1,000), or both;

(2) Any employer who knowingly and willfully violates this section after having been previously adjudicated for a violation either by plea or conviction of this section and where the value exceeds one thousand five hundred dollars ($1,500) shall be guilty of a felony and sentenced to a term of imprisonment not to exceed three (3) years, or a fine of not more than five thousand dollars ($5,000) or both.

(j)(1) The director of the department of labor and training shall, on or before December 31, 2024, and annually thereafter on or before December 31, file a report (the “report”) with the governor, the speaker of the house, and the president of the senate. This report shall provide information on the status, progress, and recommendations, if any, as well as the information and data set forth in subsection (j)(2) of this section, regarding the legislative initiatives set forth in this chapter.

(2) The data included in the report required by this subsection (j) shall include, but not be limited to, the following for the time period covered by the report:

(i) Number of complaints filed with the department for wage theft and misclassification of employees (“complaints”);

(ii) Number of complaints found by the department to be actionable;

(iii) Number of complaints referred by the department to the department of the attorney general;

(iv) Number of complaints that are handled administratively or civilly by the department of labor and training, both the aggregate number and also disaggregated by the resolution or outcome of those complaints, including those settled, dismissed for finding no violation, adjudicated, and, if appealed, the results of those appeals, as well as the number of pending matters; and

(v) Of the complaints referred to the department of the attorney general, a disaggregation of the complaints by resolution or outcome of those complaints, including those settled, dismissed for finding no violation, adjudicated, and, if appealed, the results of those appeals, as well as the number of pending matters. The department of the attorney general shall assist the department of labor and training in obtaining this data.

(k) The attorney general shall, on or before December 31, 2024, and annually thereafter on or before December 31, file a report (the “attorney general report”) with the governor, the speaker of the house, and the president of the senate. The data included in the attorney general report required by this subsection (k) shall include, but not be limited to, the following for the time period covered by the attorney general report:

(1) The number of complaints referred to the attorney general for wage theft and misclassification of employees (“wage theft complaints”);

(2) The number of civil and criminal wage theft complaints filed by the attorney general for and arising out of wage theft and misclassification of employees;

(3) A disaggregation of the wage theft complaints by resolution or outcome of those wage theft complaints, including those handled by plea agreement, by conviction, by a finding of not guilty, or other disposition;

(4) The number of such cases that are appealed, and the results of those appeals that have reached disposition;

(5) The number of cases pending both before the trial court and on appeal; and

(6) Such other information, findings, and recommendations as the attorney general determines to be appropriate to address the legislative initiatives set forth in this chapter.