In the new Louisville Business First Legal Forum Column, BGD attorney Steven A. Brehm discussed what employers should know about the proposed bill that imposes penalty on Kentucky construction contractors who misclassify employees. Read his advice below and don’t miss our monthly Legal Forum Column in Louisville Business First!
What should I know about the proposed bill that imposes penalty on Kentucky construction contractors who misclassify employees?
A recent study of Kentucky’s unemployment insurance audits from 2007-2010 found that about one-quarter of construction employees are improperly classified as independent contractors. Kentucky construction contractors who misclassify employees as independent contractors may be penalized, according to proposed Kentucky House Bill 15 RS BR 819.
The bill states that these misclassifications have cost Kentucky’s unemployment insurance system an average of $1.75 million each year and the state $6.13 million in annual tax revenue; the Kentucky General Assembly estimates that this misclassification allows offending employers to get an unfair advantage by reducing their payroll by thirty percent.
If the recently proposed bill passes, it would establish civil penalties. The first violation would result in a fine of up to $1,000. A penalty of up to $5,000 per occurrence could be assessed for each subsequent violation within a five year period. The bill would also create a presumption that a person who performs services for a contractor is an employee.