Maryland Employers Will Face Tougher Sanctions for Misclassifying Workers as Independent Contractors

By: Donna M. Glover, Esq., Ober|Kaler

The heightened focus on misclassification of workers as independent contractors should cause concern for employers. At least 30 states have partnered with the federal government to target worker misclassification, with Virginia as the most recent state to enter into an agreement with the U.S. Department of Labor (“DOL”) to target misclassification. Click here to read more about the DOL’s misclassification initiative and to find out if your state has joined forces with the federal government.

Maryland employers will soon face tougher penalties for worker misclassification. Effective October 1, 2016, the “Recovery of Benefits and Penalties for Fraud Act (“the Act”) amends the Maryland Unemployment Insurance Law to provide for significant civil penalties for knowingly misclassifying workers as independent contractors.

Civil Penalties For Misclassification

If an employer fails to properly classify an individual as an employee, it will, of course, be required to make the necessary unemployment contribution payments to the State. The Act, however, also provides that the contributions will now be subject to an interest rate of two percent per month if the employer fails to pay the outstanding contributions within 45 days after the Maryland Department of Labor, Licensing and Regulation (“DLLR”) issues an assessment to the employer.

Additionally, if an employer knowingly misclassifies workers, the employer will be subject to a civil penalty of up to $5,000 per employee. For subsequent knowing violations, the DLLR may assess double penalties, that is, up to $10,000 per employee who is misclassified. Additionally, the Act provides that any individual who knowingly advises an employer to violate the Act will be subject to a civil penalty of up to $20,000. The Act defines “knowingly” as having “actual knowledge, deliberate ignorance, or reckless disregard for the truth.”

Read more here.

Contact Donna Glover at dmglover@ober.com, or 410.347.7347.