It is important that employers in Pennsylvania properly classify workers as either employees or independent contractors. This is because employees have rights to employment-based benefits including health insurance and retirement benefits, as well as rights to unemployment benefits and workers’ compensation insurance that are not afforded to independent contractors.
What is an independent contractor?
All workers in Pennsylvania are classified as employees by default unless it can be proven they are an independent contractor. There are five requirements that must be met to prove a worker is an independent contractor. First, the worker’s performance cannot be controlled or directed by the employer. Second, the worker must be customarily engaged in an independent profession, meaning the tools of the trade must belong to the worker and the worker’s arrangements with the employer are such that the worker will either make a profit or suffer a loss when performing these services. Third, the worker must have a proprietary interest in their business. Fourth the worker must have a business location separate from that of the employer. Finally, the worker must carry at least $50,000 in liability insurance.
Independent contractors in the construction industry
There are further requirements under Pennsylvania law that must be met for a worker to be considered an independent contractor. There must be a written contract signed by the worker regarding the services being provided. The employer cannot control or direct the performance of the worker’s services. Finally, the services must be those customarily engaged in in the worker’s independent trade or business.
Avoid misclassification
It is important that workers who are employees are not classified as independent contractors. Doing so can subject the employer to a wage and hour claim and, moreover, can deprive a worker of rights afforded to them. Employees and employers should make sure they understand their employment law rights, so they can make informed decisions should a dispute arise.