2009 Maryland Labor and Employment Legislative Update

April 27, 2009

During the 2009 legislative session, the Maryland General Assembly passed a number of bills relating to labor and employment. The Governor has signed a number of these bills and is expected to sign all the remaining legislation. This article gives a brief summary of the key provisions of these bills.

Workplace Fraud Act Passed By General Assembly

The Maryland Workplace Fraud Act of 2009 establishes severe penalties upon Maryland employers in construction services and landscaping services for misclassifying individuals as independent contractors. Claims can be filed with the Maryland Commissioner of Labor and Industry (“Commissioner”) and pursued through procedures set forth in the statute and the State Administrative Procedures Act. Alternatively, individuals may sue on their own if no award has been issued in an administrative proceeding.

Employers who misclassify individuals must pay restitution to those not properly classified. Employers must also come into compliance with all applicable labor laws, including those related to income tax withholding, unemployment insurance and workers’ compensation payments. These requirements must be met within 45 days or a civil penalty of up to $1,000 per affected employee may be assessed.

Employers who knowingly (as defined by the statute) fail to properly classify individuals must also pay restitution and satisfy other labor law obligations. Additionally, these employers may be required to pay up to three times the restitution owed to each affected person and a civil penalty of up to $5,000 for each employee who is not properly classified. Employers who are guilty of knowingly committing a second offense can be assessed a civil money penalty of up to $10,000 per employee, and subsequent knowing violations can result in civil money penalties of up to $20,000 per employee.

The statute also covers a wide variety of additional topics. For example, the statute:

  • Defines certain individuals as being exempt from its provisions.
  • Contains a test to determine whether a person is an independent contractor.
  • Contains a provision that creates a presumption of an employer-employee relationship.
  • Provides the Commissioner with broad powers of investigation, including the right to enter worksites, interview employees and copy documents.
  • Requires employers to attest to the truthfulness of documents provided or provide a written statement about the classification of each employee.
  • Provides that failure to produce documents or written statements within 15 days of a request can result in a fine of up to $500 per day.
  • Grants subpoena power to the Commission for use against alleged non-compliant employers.

The statute further requires employers to provide independent contractors and others not classified as employees with written statements of their classifications, the implications of the classification, and other information to be set forth in proposed regulations. Records must be kept for at least three (3) years detailing such items as: the occupation and classification of each employee and independent contractor; the rates or methods of pay; the amounts paid each pay period; the hours worked each day and each period; “evidence” that each person so classified is an exempt person or independent contractor; and whatever else the Commissioner may require by regulation.

The statute contains anti-discrimination and anti-retaliation provisions. Further, it prohibits the creation of new entities to avoid the requirements of the Act. It even contains a provision for reporting attorneys and accountants who provide advice leading to a finding that the law has been violated to licensing and regulatory bodies.

The effective date of the statute is October 1, 2009 (assuming it is signed into law by the Governor, which appears likely). Employers in Maryland in the construction and landscaping industries who employ independent contractors are well advised to be sure that counsel reviews their arrangements before October 1. Failure to do so could have devastating consequences.

Flexible Leave Act Clarified

Last year, the Maryland General Assembly passed the Flexible Leave Act, which became effective October 1, 2008. (See 7/24/08 WorkCite). In short, the law allows employees to use leave with pay for the illness of the employee’s child, spouse or parent. The General Assembly amended the law to make certain clarifications during the 2009 session. These amendments are effective immediately.

In addition to defining “child” and “parent,” and clarifying the employees and employers to whom the law applies, the amendments significantly clarify the definition of leave with pay. The revised Act provides that leave with pay means paid time away from work that is earned and available to an employee based on hours worked or as an annual grant of a fixed number of hours or days of leave for performance of service. Leave with pay does not include benefits provided under an employee welfare benefits plan subject to ERISA, an insurance benefit, workers’ compensation, unemployment compensation, a disability benefit or a similar benefit.

The General Assembly also added a subsection that provides “the purpose of this section is to allow an employee of an employer to use leave with pay to care for an immediate family member who is ill under the same conditions and policy rules that would apply if the employee took leave for the employee’s own illness.”

Lilly Ledbetter Civil Rights Restoration Act Adopted

On April 14, 2009, the Governor signed the Maryland Lilly Ledbetter Civil Rights Restoration Act of 2009. This act essentially mirrors the federal Lilly Ledbetter Fair Pay Act of 2009. (See 1/30/09 WorkCite). Thus, it provides that an unlawful employment practice occurs with respect to discrimination in compensation when: (1) a discriminatory compensation decision or other practice is adopted; (2) an individual becomes subject to a discriminatory compensation decision or other practice; or (3) an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits or other compensation is paid, resulting wholly or partly from the discriminatory compensation or other practice. The Maryland law also provides that an aggrieved individual may be awarded back pay for up to two years before the filing of a charge of discrimination where the unlawful employment practice that occurred during the limitations period is similar or related to an unlawful employment practice with regard to discrimination in compensation that occurred outside the limitations period. The Maryland law’s provisions are effective October 1, 2009, in contrast to the federal law that has retroactive effect.

Maryland State Disability Discrimination Provision Expanded

The General Assembly expanded the Maryland provision on disability discrimination in employment to bring it into alignment with its federal equivalent, the Americans with Disabilities Act. The definition of disability is expanded to include not only physical and mental impairments, but also being “regarded as” having a physical or mental impairment, and having a record of a physical or mental impairment. The expansion further requires that employers provide reasonable accommodation to their employees with disabilities, unless such accommodation would constitute an undue hardship. The expansion also prohibits employers and labor unions from retaliating against any of their employees or members for exercising their rights under the anti-discrimination law. Assuming that the revised statute is signed into law by the Governor, the changes will take effect on October 1, 2009.

Unemployment Insurance / Worker’s Compensation Benefits Expanded

Finally, the General Assembly expanded unemployment insurance benefits. Unemployment insurance benefits are now available to part-time workers who worked at least 20 hours per week, under certain circumstances, effective immediately.

The General Assembly passed a law requiring that all severance payments or wages in lieu of notice be used to offset or delay unemployment insurance benefits for a period of weeks equal to the number of weeks of the severance payment, regardless of whether such severance payment resulted from a job elimination. Previously, severance payments resulting from the elimination of a position would not reduce or delay the beginning of unemployment insurance benefits, whereas severance benefits resulting from other terminations would. If signed into law by the Governor, this change is effective July 1, 2009.

The General Assembly also increased the maximum benefit for unemployment insurance from $380.00 to $410.00 for claims establishing a new benefit year on or after October 4, 2009, and increased the maximum to $430.00 for claims arising after October 3, 2010. These provisions will be effective on October 1, 2009, again if signed into law.

Finally, the General Assembly increased the workers’ compensation death benefits payable to partial dependants to $75,000.00 for unmarried and remarried dependants. If signed into law by the Governor, this change is effective July 1, 2009.

For further information regarding any of these new laws or any other state employment law compliance issues, please contact the authors or any member of the McGuireWoods Labor & Employment or Employee Benefits teams.