Ohio Bill Would Create a Standard Definition of Employee and Provide Penalties for Worker Misclassification

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Ohio Bill Would Create a Standard Definition of Employee and Provide Penalties for Worker Misclassification

October 7, 2015

By: Patrick Hollrah

Ohio companies that do business with independent contractors should be aware that State Representative Wes Retherford (R) along with six bi-partisan co-sponsors introduced H.B. 355 on October 6, 2015. The bill would create a generally uniform definition of employee for workers’ compensation, unemployment insurance, and tax purposes, while also providing penalties for worker misclassification.

The bill would require the Administrator of Workers’ Compensation (“Administrator”) to establish a test to determine whether a worker is an independent contractor or employee that is consistent with the Internal Revenue Service’s common law test used to determine an employer-employee relationship. If enacted, the bill would reduce the burden and uncertainty associated with determining a worker’s status under the current patchwork of state laws.

In addition, H.B. 355 would provide penalties for worker misclassification. The bill would make the Administrator’s determination that an employer has misclassified an employee as an independent contractor binding on the Director of Job and Family Services and the Tax Commissioner unless the worker is otherwise not considered an employee under applicable law. Also, after the Administrator determines that an employer engaged in worker misclassification, H.B. 355 would require the Administrator to notify the Director of Job and Family Services and the Tax Commissioner of such determination and assess a penalty of $5,000 for each misclassified worker. Furthermore, if an employer is found to have misclassified a worker within five years of a previous instance of worker misclassification, the employer would be found guilty of a felony.

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