HF 2385 (LSB 5583YH (2) 91)

HOUSE FILE 2385

BY  B. MEYER, WILBURN, MATSON, BROWN-POWERS, AMOS JR., WICHTENDAHL, WILSON, RAMIREZ, KRESSIG, MADISON, CROKEN, JACOBY, GJERDE, EHLERT, GAINES, R. JOHNSON, KURTH, JAMES, and GOSA

A BILL FOR

An Act prohibiting the misclassification of employees as independent contractors, providing penalties, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 84A.5, subsection 3, Code 2026, is amended to read as follows:
   3.  The department of workforce development is responsible for administration of unemployment compensation benefits and collection of employer contributions under chapter 96, providing for the delivery of free public employment services established pursuant to chapter 96, other job placement and training programs established pursuant to section 84A.6, employment agencies under chapter 84I, enforcement of chapter 95 relating to misclassification, and the delivery of services located throughout the state.
    Sec. 2.  NEW SECTION.  95.1  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Department” means the department of workforce development.
   2.  “Employee” means an individual who performs services in this state for an employer in return for remuneration and who is considered an employee under regulations or guidelines of the federal internal revenue service in effect as of the date of an alleged misclassification.
   3.  “Employer” means a person who employs an individual in this state for wages.
   4.  “Independent contractor” means an individual who performs services in this state for an employer in return for remuneration and who is considered an independent contractor under regulations or guidelines of the federal internal revenue service in effect as of the date of an alleged misclassification.
   5.  “Misclassify” or “misclassification” means to classify an individual for employment purposes as an independent contractor rather than an employee, contrary to regulations or guidelines of the federal internal revenue service in effect as of the date of an alleged misclassification, with the effect of denying the individual eligibility for an employment benefit provided by law or for a government program.
    Sec. 3.  NEW SECTION.  95.2  Misclassification of employees prohibited.
   An employer shall not willfully misclassify an individual.
    Sec. 4.  NEW SECTION.  95.3  Civil penalty —— procedures.
   1.  An employer who violates section 95.2 shall be subject to a civil penalty of up to five thousand dollars per misclassified individual for a first offense, up to seven thousand five hundred dollars per misclassified individual for a second offense, and up to ten thousand dollars per misclassified individual for each subsequent offense.
   2.  The department shall provide written notice to an employer prior to imposition of a civil penalty under this section. An employer may contest and seek judicial review of a determination of the department under this chapter pursuant to chapter 17A; however, for purposes of this section, an employer shall bear the burden to demonstrate by a preponderance of the evidence that the employer did not violate section 95.2.
   3.  Upon a final determination of the department that an employer violated section 95.2 and the conclusion of the period for any appeals, all of the following apply:
   a.  The department shall bring an action in district court to collect the penalties provided in this section. The department shall remit any penalties collected to the treasurer of state for deposit in the general fund.
   b.  The department shall refer the violation to a county attorney. A county attorney shall not be bound by any determination of the department.
    Sec. 5.  NEW SECTION.  95.4  Criminal penalty.
   In addition to the civil penalties provided in section 95.3, an employer who violates section 95.2 commits a class “D” felony.
    Sec. 6.  NEW SECTION.  95.5  Enforcement —— rules.
   1.  The department shall enforce this chapter. The department may establish additional procedures to implement this chapter and may employ inspectors and any other personnel deemed necessary to implement this chapter, subject to the provisions of chapter 8A, subchapter IV.
   2.  The department shall adopt rules pursuant to chapter 17A to administer this chapter.
    Sec. 7.  APPLICABILITY.  This Act applies to misclassification, as defined in section 95.1, as enacted by this Act, of an individual by an employer occurring on or after the effective date of this Act.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill prohibits an employer from willfully misclassifying an individual who performs services for the employer in return for remuneration as an independent contractor rather than an employee with the effect of denying the individual eligibility for an employment benefit provided by law or for a government program. Whether an individual performs services as an employee or independent contractor is determined under regulations or guidelines of the federal internal revenue service in effect as of the date of an alleged misclassification. The bill is enforced by the department of workforce development.
   An employer who violates this prohibition shall be subject to a civil penalty of up to $5,000 per misclassified individual for a first offense, up to $7,500 per misclassified individual for a second offense, and up to $10,000 per misclassified individual for each subsequent offense.
   The department shall provide written notice to an employer prior to imposition of a civil penalty. An employer may contest and seek judicial review of a determination of the department pursuant to Code chapter 17A. An employer shall bear the burden of proving that the employer did not misclassify an individual. Upon a final determination of the department that a violation occurred and the conclusion of the period for any appeals, the department shall bring an action in district court to collect the civil penalties for deposit in the general fund and refer the violation to a county attorney. A county attorney shall not be bound by any determination of the department.
   An employer who misclassifies an individual in violation of the bill commits a class “D” felony. A class “D” felony is punishable by confinement for no more than five years and a fine of at least $1,025 but not more than $10,245.
   The bill applies to misclassification of an individual by an employer occurring on or after the effective date of the bill.