Politics & Government

Morganelli Says He'll Crack Down on Construction Fraud

New law makes it illegal to classify workers as "subcontractors" except in certain situations.

Northampton County District Attorney John Morganelli said Tuesday he will enforce a new state law that makes it illegal for construction firms to misclassify workers as "subcontractors."

The Construction Workplace Misclassification Act, which went into effect last week, allows state and local prosecutors to go after companies that misclassify their employees in order to save money.

Under the law, companies who do this could receive fines and stop work orders.

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According to the law, workers can only be considered independent contractors under very specific circumstances:

  • They have a written contract with the business or person they work for.
  • They control and direct their own work.
  • They possess the tools needed to do their work.
  • The arrangement they have with their employer allows them to earn a profit or suffer a loss from their work.
  • They are an owner/partner in their business.
  • Their business location is separate from the location of the person who hired them to do construction work.
  • They previously worked as an independent contractor, or held themselves out to the public as available as an independent contractor.
  • They have at least $50,000 in liability insurance.

Morganelli said that in the past, construction companies have classified their workers as subcontractors to avoid paying payroll taxes, health benefits and higher wages, and to hire illegal workers.

Find out what's happening in Hellertown-Lower Sauconwith free, real-time updates from Patch.

He told reporters Tuesday that he's gotten "two to three" complaints about local contractors engaged in this practice, although he declined to say who they were.

"And that was just recently," Morganelli said. "We used to get complaints...but there was no enforcement mechanism at the time."

Now that the practice can be policed, it's not clear how that will happen. The law gives both county district attorneys and the state Attorney General jurisdiction over the matter. Morganelli insisted his office has the resources to investigate the cases, but said it's also possible the state Department of Labor could conduct investigations based on referrals from the DA's office. 

"We could notify the companies and maybe they could remedy the situation," he said.

Pennsylvania is not the first state to enact such a law. New York, for example, adopted the Construction Industry Fair Play Act last year.


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