SB 586 — An Act providing for criteria for independent contractors and for powers and duties of the Department of Labor and Industry and the Secretary of Labor and Industry; and imposing penalties.

PRINTER'S NO.   593

                    THE GENERAL ASSEMBLY OF PENNSYLVANIA



                        SENATE BILL
                        No. 586
                                                 Session of
                                                   2025

     INTRODUCED BY PISCIOTTANO, PENNYCUICK, KANE, KEARNEY, HUGHES,
        COSTA AND SAVAL, APRIL 9, 2025

     REFERRED TO LABOR AND INDUSTRY, APRIL 9, 2025


                                       AN ACT
 1   Providing for criteria for independent contractors and for
 2      powers and duties of the Department of Labor and Industry and
 3      the Secretary of Labor and Industry; and imposing penalties.
 4                              TABLE OF CONTENTS
 5   Section 1.    Short title.
 6   Section 2.    Definitions.
 7   Section 3.    Independent contractors.
 8   Section 4.    Improper classification of employees.
 9   Section 5.    Criminal penalties.
10   Section 6.    Private right of action.
11   Section 7.    Administrative penalties.
12   Section 8.    Stop-work orders.
13   Section 9.    Procedure.
14   Section 10.    Certain agreements prohibited.
15   Section 11.    Adverse action prohibited.
16   Section 12.    Availability of information.
17   Section 13.    Use of penalty funds and recovered fees and costs.
18   Section 14.    Rules and regulations.
 1   Section 15.    Annual report required.
 2   Section 16.    Severability.
 3   Section 17.    Construction of law.
 4   Section 18.    Funding.
 5   Section 19.    Effective date.
 6      The General Assembly of the Commonwealth of Pennsylvania
 7   hereby enacts as follows:
 8   Section 1.    Short title.
 9      This act shall be known and may be cited as the Workplace
10   Misclassification Act.
11   Section 2.    Definitions.
12      The following words and phrases when used in this act shall
13   have the meanings given to them in this section unless the
14   context clearly indicates otherwise:
15      "Construction."    As defined in section 2 of the act of
16   October 13, 2010 (P.L.506, No.72), known as the Construction
17   Workplace Misclassification Act.
18      "Debar."    Action taken by the secretary that:
19          (1)    Prohibits a contractor, subcontractor or person from
20      contracting with or participating in contracts for public
21      work or providing services to any State or local government
22      entity for a period of at least three years.
23          (2)    Includes all divisions or other organizational
24      elements of the contractor or subcontractor unless limited by
25      the terms of the action to specific divisions or
26      organizational elements.
27          (3)    May apply to affiliates or other persons associated
28      with the contractor, subcontractor or person if they are
29      specifically named and given written notice of the action and
30      an opportunity to appeal.

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 1          (4)   Applies to a successor entity of the contractor or
 2      subcontractor, if the successor entity:
 3                (i)    has one or more of the same principals or
 4          officers as the employer against whom the order was
 5          issued;
 6                (ii)    performs similar work within the same
 7          geographical area;
 8                (iii)    occupies the same premises;
 9                (iv)    shares the same telephone number or facsimile
10          number;
11                (v)    has the same email address or Internet website;
12                (vi)     employs substantially the same workforce or
13          administrative employees, or both;
14                (vii)    utilizes the same tools, equipment or
15          facilities;
16                (viii)     employs or engages the services of any person
17          or persons involved in the direction or control of the
18          other; or
19                (ix)    lists substantially the same work experience.
20      "Department."      The Department of Labor and Industry of the
21   Commonwealth.
22      "Employee."      Either of the following:
23          (1)   In relation to workers' compensation, the term shall
24      have the meaning given to "employe" in section 104 of the
25      Workers' Compensation Act.
26          (2)   In relation to unemployment compensation, the term
27      shall have the meaning given to "employe" in section 4(i) of
28      the Unemployment Compensation Law.
29      "Employer."      Either of the following:
30          (1)   In relation to workers' compensation, the term shall

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 1      have the meaning given to it in section 103 of the Workers'
 2      Compensation Act.
 3            (2)   In relation to unemployment compensation, the term
 4      shall have the meaning given to it in section 4(j) of the
 5      Unemployment Compensation Law.
 6      "Public work."     As defined in section 2(5) of the act of
 7   August 15, 1961 (P.L.987, No.442), known as the Pennsylvania
 8   Prevailing Wage Act.
 9      "Secretary."     The Secretary of Labor and Industry of the
10   Commonwealth or the secretary's authorized representative.
11      "Unemployment Compensation Law."       The act of December 5, 1936
12   (2nd Sp.Sess., 1937 P.L.2897, No.1), known as the Unemployment
13   Compensation Law.
14      "Workers' Compensation Act."     The act of June 2, 1915
15   (P.L.736, No.338), known as the Workers' Compensation Act.
16   Section 3.     Independent contractors.
17      (a)   Requirements.--For purposes of workers' compensation,
18   unemployment compensation and improper classification of
19   employees, an individual who performs services in any industry
20   other than construction for remuneration is an independent
21   contractor only if:
22            (1)   The individual has a written contract that is
23      project-specific and contains a particular scope of work and
24      definitive time period to perform the services.
25            (2)   The individual is free from control or direction
26      over performance of services both under the contract of
27      service and in fact.
28            (3)   As to services, the individual is customarily
29      engaged in an independently established trade, occupation,
30      profession or business.

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 1         (b)   Criteria.--An individual is customarily engaged in an
 2   independently established trade, occupation, profession or
 3   business with respect to services the individual performs only
 4   if:
 5               (1)   The individual possesses the essential tools,
 6         equipment and other assets necessary to perform the services
 7         independent of the person for whom the services are
 8         performed.
 9               (2)   The individual's arrangement with the person for
10         whom the services are performed is such that the individual
11         shall realize a profit or suffer a loss as a result of
12         performing the services.
13               (3)   The individual performs the services through a
14         business in which the individual has a proprietary interest.
15               (4)   The individual maintains a business location that is
16         separate from the location of the person for whom the
17         services are being performed.
18               (5)   The individual:
19                     (i)    previously performed the same or similar
20               services for another person in accordance with paragraphs
21               (1), (2), (3) and (4) while free from direction or
22               control over performance of the services both under the
23               contract of service and in fact; or
24                     (ii)    holds themselves out to other persons as
25               available and able and is available and able to perform
26               the same or similar services in accordance with
27               paragraphs (1), (2), (3) and (4) while free from
28               direction or control over performance of the services.
29         (c)   Factors not to be considered.--The failure to withhold
30   Federal or State income taxes or pay unemployment compensation

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 1   contributions or workers' compensation premiums with respect to
 2   an individual's remuneration shall not be considered in
 3   determining whether the individual is an independent contractor
 4   for purposes of the Workers' Compensation Act or the
 5   Unemployment Compensation Law.
 6      (d)   Workers' compensation.--
 7            (1)   An individual who is an independent contractor as
 8      determined under this section is not an employee for purposes
 9      of the Workers' Compensation Act. For purposes of this
10      section, each employment relationship shall be considered
11      separately.
12            (2)   Nothing in this act shall be construed to affect
13      section 321(2) of the Workers' Compensation Act.
14      (e)   Unemployment compensation.--
15            (1)   For purposes of section 4(l)(2)(B) of the
16      Unemployment Compensation Law, an individual is customarily
17      engaged in an independently established trade, occupation,
18      profession or business only if the criteria in subsection (b)
19      are satisfied.
20            (2)   Except as provided in paragraph (1), nothing in this
21      act shall be construed to affect any exclusion from
22      employment as defined in the Unemployment Compensation Law.
23   Section 4.     Improper classification of employees.
24      (a)   Violation.--An employer or officer or agent of an
25   employer shall be in violation of this act and shall be subject
26   to the penalties, remedies and actions contained in this act if
27   the employer, officer or agent:
28            (1)   fails to properly classify an individual as an
29      employee for purposes of the Workers' Compensation Act and
30      fails to provide the coverage required under the Workers'

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 1      Compensation Act; or
 2            (2)   fails to properly classify an individual as an
 3      employee for purposes of the Unemployment Compensation Law
 4      and fails to pay contributions, reimbursements or other
 5      amounts required to be paid under the Unemployment
 6      Compensation Law.
 7      (b)   Separate offenses.--Each individual who is not properly
 8   classified as an employee shall be the basis of a separate
 9   violation of this section.
10      (c)   Order to show cause.--
11            (1)   If the secretary receives information indicating
12      that a person has violated this act, the secretary may
13      investigate the matter and issue an order to show cause why
14      the person should not be found in violation of this act.
15            (2)   A person served with an order to show cause has 20
16      days from the date the order is served to file an answer in
17      writing.
18            (3)   If the person fails to file a timely and adequate
19      answer to the order to show cause, the secretary may,
20      following notice and hearing:
21                  (i)    petition a court of competent jurisdiction to
22            issue a stop-work order as provided in section 8; or
23                  (ii)    immediately assess penalties as provided in
24            section 7.
25      (d)   Enforcement.--
26            (1)   If, subsequent to issuing an order to show cause
27      under subsection (c), the secretary finds that an employer
28      has failed to properly classify an individual as an employee
29      for the purposes of this act, the secretary shall impose
30      administrative penalties under section 7.

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 1            (2)   In addition to imposing penalties under paragraph
 2      (1), the secretary may refer the matter to the Attorney
 3      General for criminal investigation. The secretary shall make
 4      a referral if the employer has previously been found in
 5      violation of this act in another matter. The Attorney General
 6      has jurisdiction under section 5 to initiate an investigation
 7      or prosecution of criminal violations of this act regardless
 8      of whether a referral has been made.
 9      (e)   Acting in concert with other parties.--A party that does
10   not meet the definition of "employer" in section 2, but which
11   intentionally contracts or renews a contract with an employer to
12   supply labor to an employer knowing the employer will
13   misclassify the supplied employees in violation of this act,
14   shall be subject to the same penalties, remedies or other
15   actions as the employer found to be in violation of this act.
16      (f)   Defense.--It shall be a defense to an alleged violation
17   of this section that the person for whom the services are
18   performed in good faith believed the individual who performed
19   the services qualified as an independent contractor at the time
20   the services were performed.
21   Section 5.     Criminal penalties.
22      (a)   Grading.--An employer or officer or agent of an employer
23   that intentionally violates section 4(a) commits:
24            (1)   A misdemeanor of the first degree, if the employer
25      has no prior offense under section 4(a).
26            (2)   A felony of the third degree, if the employer has
27      one or more prior offenses under section 4(a).
28      (b)   Summary offense.--
29            (1)   An employer or officer or agent of an employer that
30      negligently fails to properly classify an individual as an

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 1      employee under section 4(a) commits a summary offense and
 2      shall, upon conviction, be sentenced to pay a fine of not
 3      more than $1,000.
 4             (2)   Evidence of a prior conviction under this subsection
 5      shall be admissible as evidence of intent under subsection
 6      (a).
 7      (c)    Concurrent jurisdiction.--
 8             (1)   The Attorney General has concurrent prosecutorial
 9      jurisdiction with the district attorney of the appropriate
10      county for violations under this section and any offense
11      arising out of activity prohibited by this section.
12             (2)   No person charged with a violation of this section
13      by the Attorney General has standing to challenge the
14      authority of the Attorney General to prosecute the case, and
15      if a challenge is made, the challenge shall be dismissed and
16      no relief shall be available in the courts of this
17      Commonwealth to the person making the challenge.
18      (d)    Definitions.--As used in this section, the following
19   words and phrases shall have the meanings given to them in this
20   subsection unless the context clearly indicates otherwise:
21      "Prior offense."      A conviction of a violation of section 4 if
22   the judgment of sentence was imposed before the defendant was
23   sentenced for a separate violation of section 4.
24   Section 6.      Private right of action.
25      (a)    Employees.--An employee who has been misclassified in
26   violation of this act, or has been discharged, been threatened
27   or has otherwise suffered retaliation, discrimination or other
28   adverse action as a result of participating in an investigation
29   or reporting a violation of this act, may bring a private right
30   of action in a court of common pleas in accordance with

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 1   established civil procedures of this Commonwealth.
 2      (b)   Time.--An action under this section must be brought
 3   within three years from the date that the employee knew of the
 4   violation, retaliation or discrimination.
 5      (c)   Relief.--If an employee prevails in an action commenced
 6   under this section, the employee shall be entitled to the
 7   following relief:
 8            (1)   Reinstatement of the employee without a loss in
 9      seniority status, if applicable.
10            (2)   Restitution equal to three times the amount of the
11      employee's wages and fringe benefits calculated from the date
12      of the violation, retaliation or discrimination.
13            (3)   Reasonable attorney fees and costs of the action.
14            (4)   Other legal and equitable relief the court deems
15      appropriate to make the employee whole.
16   Section 7.     Administrative penalties.
17      (a)   Power of secretary.--If the secretary finds that a
18   person has violated this act, the secretary:
19            (1)   Shall assess and collect civil penalties of not more
20      than $1,000 for the first violation and not more than $2,500
21      for each subsequent violation.
22            (2)   May order a financial audit or tax audit of any
23      relevant prospective records of the person.
24      (b)   Factors to be considered.--When determining the amount
25   of the penalty to be imposed, the secretary shall consider
26   factors, including:
27            (1)   The history of previous violations by the employer.
28            (2)   The seriousness of the violation.
29            (3)   The good faith of the employer.
30            (4)   The size of the employer's business.

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 1      (c)   Intentional violation.--
 2            (1)   If the secretary determines that a person has
 3      intentionally violated this act, the secretary shall debar,
 4      for a period of at least three years, the person from bidding
 5      on or participating in a public work project or providing
 6      services to any State or local government entity or any
 7      private entity that performs work on behalf of a State or
 8      local contract.
 9            (2)   A debarment under paragraph (1) shall apply to the
10      following:
11                  (i)    Future projects and contracts not begun or
12            entered into on or before the date of the debarment.
13                  (ii)    Current projects and contracts already entered
14            into but on which the debarred contractor, subcontractor
15            or person has not begun work as of the date of the
16            debarment.
17   Section 8.     Stop-work orders.
18      (a)   Issuance of order.--
19            (1)   If the secretary determines, subsequent to the
20      issuance of an order to show cause under section 4(c), that
21      an employer or officer or agent of an employer has
22      intentionally failed to properly classify an individual as an
23      employee under section 4(a), the secretary may petition a
24      court of competent jurisdiction to issue a stop-work order
25      requiring:
26                  (i)    the cessation of work by individuals who are
27            improperly classified within 24 hours of the effective
28            date of the order; or
29                  (ii)    in the event that a majority of individuals
30            working at a site are improperly classified, requiring

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 1            the cessation of all business operations of that employer
 2            at each site at which a violation occurred within 24
 3            hours of the effective date of the order.
 4            (2)   The order shall take effect when served upon the
 5      employer, or for a particular employer worksite, when served
 6      at the worksite. The order shall remain in effect until the
 7      court issues an order releasing the stop-work order or upon
 8      finding that the employer or officer or agent of the employer
 9      is no longer in violation of this act.
10            (3)   An order releasing a stop-work order may include a
11      requirement that the employer file with the department
12      periodic reports for a probationary period that may not
13      exceed two years demonstrating the employer's continued
14      compliance with this act.
15      (b)   Applicability of orders and penalties.--A stop-work
16   order under subsection (a) and penalty under subsection (c)
17   shall be in effect against any successor corporation or business
18   entity that has one or more of the same principals or officers
19   as the employer against whom the stop-work order was issued or
20   penalty imposed and which is engaged in the same or equivalent
21   trade or activity.
22      (c)   Penalty.--The court shall assess a penalty of $1,000 per
23   day against an employer for each day that the employer conducts
24   business operations in violation of a stop-work order issued
25   under this section.
26   Section 9.     Procedure.
27      (a)   Hearings.--Actions taken under sections 4(c) and 6 shall
28   be subject to the provisions of 2 Pa.C.S. (relating to
29   administrative law and procedure).
30      (b)   Subpoenas.--The department may subpoena witnesses,

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 1   administer oaths, examine witnesses and take testimony or compel
 2   the production of documents. The secretary may petition
 3   Commonwealth Court to enforce any order or subpoena issued under
 4   this act.
 5   Section 10.    Certain agreements prohibited.
 6      (a)   Violation.--No person may require or demand that an
 7   individual enter into an agreement or sign a document that
 8   results in the improper classification of the individual as an
 9   independent contractor.
10      (b)   Penalty.--A violation of subsection (a) shall be
11   punishable by an administrative fine of not less than $1,000 and
12   not more than $2,500. Each violation shall be considered a
13   separate offense under this section.
14   Section 11.    Adverse action prohibited.
15      (a)   Retaliation or discrimination.--It shall be unlawful for
16   an employer or officer or agent of an employer to discharge,
17   threaten or otherwise retaliate or discriminate against an
18   employee regarding compensation or other terms or conditions of
19   employment because the employee:
20            (1)   participates in an investigation, hearing or inquiry
21      by the secretary or any governmental authority; or
22            (2)   reports or makes a complaint regarding the violation
23      of this act to an employer or any governmental authority.
24      (b)   Action.--An employee who suffers adverse action in
25   violation of this section may bring a private right of action
26   under section 6.
27      (c)   Good faith allegations of noncompliance.--A person who
28   in good faith alleges noncompliance with this act shall be
29   afforded the rights provided by this act, notwithstanding the
30   person's failure to prevail on the merits.

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 1      (d)   Rebuttable presumptions.--Taking adverse action against
 2   a person within 90 days of the person's exercise of a right
 3   protected under this act shall raise a rebuttable presumption of
 4   having done so in retaliation for the exercise of the right.
 5   Section 12.   Availability of information.
 6      (a)   Duty of department.--The department shall develop a
 7   poster for job sites that outlines the requirements and
 8   penalties under this act and shall make the poster available on
 9   the department's publicly accessible Internet website. At the
10   discretion of the secretary, the department may establish and
11   answer a toll-free telephone number to receive alleged
12   violations of this act.
13      (b)   Duty of employers.--An employer shall keep a summary of
14   this act and any regulations issued under this act applicable to
15   the employer, posted in a conspicuous place where employees
16   normally pass and can read it, both on job sites and in all
17   places of business.
18   Section 13.   Use of penalty funds and recovered fees and costs.
19      Any money collected as a penalty, recovered attorney fee or
20   cost associated with any investigation or enforcement action
21   under this act shall be deposited into a restricted revenue
22   account in the General Fund. Money deposited into the restricted
23   revenue account is appropriated on a continuing basis to the
24   department for the purpose of enforcing this act.
25   Section 14.   Rules and regulations.
26      The department may promulgate rules and regulations necessary
27   to implement this act.
28   Section 15.   Annual report required.
29      The department shall submit an annual report to the General
30   Assembly by March 1 of the year following the first full year in

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 1   which this act is in effect, and each year thereafter,
 2   detailing, to the maximum extent possible, data on the previous
 3   calendar year's administration and enforcement of this act. The
 4   department may include any relevant facts and statistics that it
 5   believes necessary in the content of the report.
 6   Section 16.     Severability.
 7         The provisions of this act are severable. If any provision of
 8   this act or its application to any individual or circumstance is
 9   held invalid, the invalidity shall not affect other provisions
10   or applications of this act which can be given effect without
11   the invalid provision or application.
12   Section 17.     Construction of law.
13         Nothing contained in this act shall be construed to impair or
14   affect in any manner the ability of the department and secretary
15   to carry out the powers and duties prescribed by the laws of
16   this Commonwealth.
17   Section 18.     Funding.
18         (a)   Enforcement.--The department shall not be required to
19   enforce this act until adequate funding is appropriated or
20   transferred into the restricted account identified in section
21   13.
22         (b)   Recovery of fees and costs.--The department, Office of
23   Attorney General or a district attorney's office shall be
24   entitled to recover attorney fees and costs associated with the
25   investigation of employee misclassification, along with any
26   resulting enforcement action, from employers that violate this
27   act.
28   Section 19.     Effective date.
29         This act shall take effect in four months.



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