H.F. 2371 Section 1. NEW SECTION . 95.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. “Department” means the department of workforce 4 development. 5 2. “Employee” means an individual who performs services in 6 this state for an employer in return for remuneration and who 7 is considered an employee under regulations or guidelines of 8 the federal internal revenue service in effect as of the date 9 of an alleged misclassification. 10 3. “Employer” means a person who employs an individual in 11 this state for wages. 12 4. “Independent contractor” means an individual who 13 performs services in this state for an employer in return for 14 remuneration and who is considered an independent contractor 15 under regulations or guidelines of the federal internal 16 revenue service in effect as of the date of an alleged 17 misclassification. 18 5. “Misclassify” or “misclassification” means to classify an 19 individual for employment purposes as an independent contractor 20 rather than an employee, contrary to regulations or guidelines 21 of the federal internal revenue service in effect as of the 22 date of an alleged misclassification, with the effect of 23 denying the individual eligibility for an employment benefit 24 provided by law or for a government program. 25 Sec. 2. NEW SECTION . 95.2 Misclassification of employees 26 prohibited. 27 An employer shall not willfully misclassify an individual. 28 Sec. 3. NEW SECTION . 95.3 Civil penalty —— procedures. 29 1. An employer who violates section 95.2 shall be subject 30 to a civil penalty of up to five thousand dollars per 31 misclassified individual for a first offense, up to seven 32 thousand five hundred dollars per misclassified individual 33 for a second offense, and up to ten thousand dollars per 34 misclassified individual for each subsequent offense. 35 -1- LSB 5067YH (4) 90 je/js 1/ 3

H.F. 2371 2. The department shall provide written notice to an 1 employer prior to imposition of a civil penalty under this 2 section. An employer may contest and seek judicial review of a 3 determination of the department under this chapter pursuant to 4 chapter 17A; however, for purposes of this section, an employer 5 shall bear the burden to demonstrate by a preponderance of the 6 evidence that the employer did not violate section 95.2. 7 3. Upon a final determination of the department that an 8 employer violated section 95.2 and the conclusion of the period 9 for any appeals, all of the following apply: 10 a. The department shall bring an action in district court to 11 collect the penalties provided in this section. The department 12 shall remit any penalties collected to the treasurer of state 13 for deposit in the general fund. 14 b. The department shall refer the violation to a county 15 attorney. A county attorney shall not be bound by any 16 determination of the department. 17 Sec. 4. NEW SECTION . 95.4 Criminal penalty. 18 In addition to the civil penalties provided in section 95.3, 19 an employer who violates section 95.2 commits a class “D” 20 felony. 21 Sec. 5. NEW SECTION . 95.5 Enforcement —— rules. 22 1. The department shall enforce this chapter. The 23 department may establish additional procedures to implement 24 this chapter and may employ inspectors and any other personnel 25 deemed necessary to implement this chapter, subject to the 26 provisions of chapter 8A, subchapter IV. 27 2. The department shall adopt rules pursuant to chapter 17A 28 to administer this chapter. 29 Sec. 6. APPLICABILITY. This Act applies to 30 misclassification, as defined in section 95.1, as enacted by 31 this Act, of an individual by an employer occurring on or after 32 the effective date of this Act. 33 EXPLANATION 34 The inclusion of this explanation does not constitute agreement with 35 -2- LSB 5067YH (4) 90 je/js 2/ 3

H.F. 2371 the explanation’s substance by the members of the general assembly. 1 This bill prohibits an employer from willfully 2 misclassifying an individual who performs services for 3 the employer in return for remuneration as an independent 4 contractor rather than an employee with the effect of denying 5 the individual eligibility for an employment benefit provided 6 by law or for a government program. Whether an individual 7 performs services as an employee or independent contractor 8 is determined under regulations or guidelines of the federal 9 internal revenue service in effect as of the date of an alleged 10 misclassification. The bill is enforced by the department of 11 workforce development. 12 An employer who violates this prohibition shall be subject 13 to a civil penalty of up to $5,000 per misclassified individual 14 for a first offense, up to $7,500 per misclassified individual 15 for a second offense, and up to $10,000 per misclassified 16 individual for each subsequent offense. 17 The department shall provide written notice to an employer 18 prior to imposition of a civil penalty. An employer may 19 contest and seek judicial review of a determination of 20 the department pursuant to Code chapter 17A. An employer 21 shall bear the burden of proving that the employer did not 22 misclassify an individual. Upon a final determination of the 23 department that a violation occurred and the conclusion of the 24 period for any appeals, the department shall bring an action in 25 district court to collect the civil penalties for deposit in 26 the general fund and refer the violation to a county attorney. 27 A county attorney shall not be bound by any determination of 28 the department. 29 An employer who misclassifies an individual in violation of 30 the bill commits a class “D” felony. A class “D” felony is 31 punishable by confinement for no more than five years and a 32 fine of at least $1,025 but not more than $10,245. 33 The bill applies to misclassification of an individual by an 34 employer occurring on or after the effective date of the bill. 35 -3- LSB 5067YH (4) 90 je/js 3/ 3