Chapter 40. Workplace Fraud

If an employer contracts with an individual and classifies that individual as an independent contractor or an exempt person, the employer shall complete the information required by §A(9) of this regulation and provide the individual with a “Notice to Independent Contractors and Exempt Persons” that contains the following information:

An employer shall use the Commissioner's “Notice to Independent Contractors and Exempt Persons”, which is available for download on the Maryland Department of Labor's website.

An employer shall post the Commissioner's “Notice to Independent Contractors and Exempt Persons” in English and Spanish in a conspicuous location at places where notices to employees are normally posted at each job site and at the office of the employer.

An employer shall retain proof that the independent contractor or exempt person was provided a copy of the “Notice to Independent Contractors and Exempt Persons” with an acknowledgement signed by the individual.

For each independent contractor and exempt person hired, an employer shall retain the following records at the work site or at its place of business:

An employer shall retain each record for 3 years.

The Commissioner may consider evidence, as provided in §B of this regulation, that an employer knowingly failed to properly classify an employee.

The evidence shall include the following:

The illustrations in this regulation provide guidance under the Workplace Fraud Act only and do not apply to any other State or federal law.

The illustrations in §§C—E of this regulation, provide guidance for the landscaping services industry in the application of Labor and Employment Article, §3-903(c), Annotated Code of Maryland.

The JB Landscaping Company (JB) is hired to install the landscaping for a new large housing development. After JB commences work, it determines that it does not have enough employees to complete the job. JB subcontracts some of its work to the Red Company (Red), a smaller landscape company. JB sets the work hours for all workers on the job. Red provides the plants and other necessary tools and equipment for the job. Red maintains its own place of business but does not perform service for more than one person or company at a time. Either JB or Red can end the services at any time. Red pays federal employee taxes. Red is an independent contractor.

While working on a large landscaping job with a Friday deadline, the Tree Company (Tree) determines that it needs additional workers to meet that deadline. On Wednesday afternoon, Tree contacts Keith Brown to see if he knows at least five workers who can report to the landscaping job in the morning. Keith Brown engages five other workers to assist with the Tree job. Tree sets the hours, provides the tools and equipment, and frequently inspects the work during the day. Keith Brown does landscaping work but does not have his own business. Tree pays Keith Brown a lump sum, which he distributes to the other workers. Keith Brown and the five other workers are employees of Tree.

The Green Company (Green), a landscaping company, is hired to landscape a building complex. Once the work is underway, the owner of the building complex decides to install a pond with a waterfall. Green does not build ponds and waterfalls so it subcontracts that work to the Water Company (Water). Water is licensed to build ponds with waterfalls, and it carries workers' compensation and liability insurance under the company name. Water performs services for more than one person at a time. All equipment and tools necessary for the pond installation are owned by Green. Because of Water's experience in the area, there is no oversight of the daily work by Green. Water is paid by Green at the completion of the job. However, Green is ultimately responsible for the final product if there are any faults or defects in the construction. Water is an independent contractor.

The illustrations in this regulation provide guidance under the Workplace Fraud Act only and do not apply to any other State or federal law.

The illustrations in §§C—J of this regulation provide guidance for the construction services industry in the application of Labor and Employment Article, §3-903(c), Annotated Code of Maryland.

John Brown has an oral agreement with ACE Building Company (ACE) to do carpentry work on houses in a development designated by ACE. John Brown supplies his own hand tools. ACE supplies the material for each job. He has to do the work himself and he works on a full time basis for the company. For some work he is paid on a piecework basis and for some work he is paid on an hourly basis. He does not have assistants, does not have an office, and does not advertise in newspapers or otherwise hold himself out to the public as being in the carpentry business. ACE can fire him any time before he finishes a job without contractual liability. John Brown is an employee of ACE.

HVAC, Inc. (HVAC) is the mechanical subcontractor on a large hospital construction contract. There is so much work to perform that HVAC contracts with two other companies, Air Supply, Inc. (Air Supply) and Kool and the Gang, Inc. (Kool), to assist with the work. Air Supply and Kool each have their own employees. HVAC retains some supervisory control over the employees of the other companies to make sure that the job is being done to the specifications of the overall mechanical contract. Air Supply and Kool exercise supervision over the installation methods of their respective workforces. Even though the two subcontractors are in the same business as HVAC and they perform the same type of work at the same location as HVAC, there is no employer-employee relationship between the contracting companies, and there is no employee-employer relationship between the subcontractors' employees and HVAC.

Sarah Green is a painting subcontractor who has contracted with XYZ General Contracting, Inc. (XYZ) to paint 264 houses. She hired 40 painters to do the work for her, although only about 15 are on the job at any one time. She supplies all the paint, brushes, and ladders. She designates the house to be painted and either pays the painters per house or by the hour. Detailed instructions about the work are not necessary because of the painters' skill in their trade. Sarah Green inspects the work and requires them to repaint any unsatisfactory work. The painters cannot engage helpers without her consent. She can discharge them for any reason, and they are free to resign at any time. The painters assume no business risks and have no capital investment. None of them has an established business. The painters are employees of Sarah Green, not XYZ, and Sarah Green is an independent contractor, not an employee of XYZ.

Milton Manning, an experienced tile and terrazzo journeyman, orally agreed with MEGA, Inc. (MEGA) to perform full-time services at construction sites. He uses his own tools and performs services in the order designated by MEGA and according to its specifications. MEGA supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers' compensation insurance on him. He does not have a place of business or hold himself out to perform similar services for others. Either party can end the services at any time. Milton Manning is an employee of MEGA.

Wallace Black agreed with the Sawdust Company (Sawdust) to supply the construction labor for a group of houses. The company agreed to pay all construction costs. However, Wallace Black supplies all the tools and the equipment. He performs personal services as a carpenter and mechanic for an hourly wage. He also acts as superintendent and foreman, and engages other individuals to assist him. Sawdust has the right to select, approve, or discharge any helper. A company representative makes frequent inspections of the construction site. When a house is finished, Wallace Black is paid a certain percentage of its costs. He is not responsible for faults, defects of construction, or wasteful operation. At the end of each week, he presents the company with a statement of the amount he has spent, including the payroll. Sawdust gives him a check for that amount from which he pays the assistants, two of whom are day laborers although he is not personally liable for their wages. Wallace Black and all of his assistants are employees of Sawdust.

Trisha Gold; Pristine; Painters.

ABC Company (ABC) hires three crews of workers to do the siding on new houses in a residential development. ABC pays each of the crews per square foot of siding installed. ABC tells each crew leader that they are independent contractors responsible for their own workers' compensation premiums and any taxes. None of the crew leaders appears to have their own business, and they fail to get any workers' compensation coverage. One of the crew leaders is designated as general foreman and has been given total responsibility for running the job, but ABC has a superintendent who periodically walks the site to make sure the work is done properly. ABC also provides safety equipment for each worker. At the end of each week, ABC pays the crew leaders a lump sum based on the square footage of siding installed. The crew leader then pays each worker based on how much siding they installed. The workers doing the siding are employees of ABC.

POP; DIG. POP General Contracting (POP) leases two employees and a backhoe from DIG Excavators, Inc. (DIG). The DIG workers are engaged to open a trench, lay some pipe, and backfill the trench. Both POP and DIG contend that neither of them is the employer of the workers, that for purposes of these lend/lease type jobs, they are independent contractors for POP. None of the workers has his own business or pays his own workers' compensation. The workers always consider DIG to be their employer and if they have questions about how to do the job, they ask their boss at DIG. The workers are employees of DIG, even while they are leased-loaned to POP.