Continuing the Fight for You…

As you know, the State of Maryland enacted the Workplace Fraud Act in 2009.  Last year, the Association’s Legislative Committee took an active role in the legislative process and fought hard to amend the Workplace Fraud Act in order to make the law easier for our industry to live with.  While we achieved our goal of amending the law, adding provisions that would provide our members with a “clear path to compliance,” our fight has not ended.

One of the issues faced by our members in 2011 and early 2012 concerned the amount of time it took for DLLR to complete their investigations and issue determinations.  While our members were required to respond to DLLR’s request for documents and information within 15 days of receipt of the request from DLLR, DLLR had no time limits on processing of the information and issuing citations.  Thanks in large part to the testimony of Charlie Vogel and Chris Adams, the law was amended to allow businesses 30 days in which to respond to DLLR’s request for documents and information, and required DLLR to issue a citation within 90 days of their receipt of the documents or close the case without taking any further action.

After the amendments were signed into law by the Governor in May of 2012, DLLR re-grouped, hired a new director for the Workplace Fraud Unit, re-named the unit the Worker Classification Protection Unit (WCPU), and re-started their enforcement efforts.  Although we had hoped that the new approach by the WCPU would be fair and less burdensome for the members of the Association and others in our industry, instead the “new” WCPU came out with guns blazing shortly after the new amendments took effect on July 1, 2012.  They initiated a number of new investigations of members of the Association as well as a number of the subcontractors with whom our members do business and took an aggressive approach to these investigations.

One of the businesses that fell victim to the WCPU was BG Flooring, LLC, a subcontractor to CB Flooring, LLC.  After being notified that it was under investigation, BG Flooring, LLC responded to the WCPU’s request for documents by providing all documents that it had in its possession to support its treatment of its workers as independent contractors.  Unfortunately, this did not include ALL the documents that the WCPU had requested.  Ultimately, the WCPU determined that BG Flooring, LLC had misclassified its workers and unit issued a citation to BG Flooring, LLC.  Luckily for BG Flooring, LLC and all of us, this citation was issued 98 days after the WCPU received the documents that BG Flooring, LLC had submitted.

BG Flooring, LLC, with the help of CB Flooring’s Compliance Officer, Kathy Sibbald, appealed the citation, on the grounds that the WCPU missed its 90 day deadline and, therefore, the case should have been closed with no citation being issued.  The WCPU contacted BG Flooring, LLC and Kathy Sibbald and requested an “informal resolution conference” to settle the matter.  The WCPU took the position that the clock never started ticking on the 90 day statutory time period because BG Flooring, LLC did not submit every single document they had asked for and did not tell the WCPU that the remaining documents requested were not available.  Kathy argued that the intent of the statute was not to give the WCPU a loophole to use against businesses, but rather to reduce the burden on businesses so they would avoid having open investigations hanging over their head for months on end.  She also argued that if there was sufficient documentation for them to make a determination and issue a citation, there was sufficient documentation to start the 90 day clock.  The informal resolution conference ended without resolution and it looked like BG Flooring, LLC would be heading to a hearing before the State’s Administrative Law Judge to determine whether or not the WCPU had violated the 90 day rule.

But before the hearing occurred, the WCPU obtained an informal opinion from the Attorney General regarding the 90 day rule.  The Attorney General disagreed with the WCPU’s interpretation of the statute and asked the WCPU to try and resolve the matter without a formal hearing because he believed it was likely that the State would lose in court.  The WCPU again contacted BG Flooring, LLC and Kathy Sibbald and attempted to reach a settlement under which BG Flooring, LLC would have admitted guilt, would have been required to pay any past due income tax, unemployment and workers’ comp, and would have been found to have committed a “knowing violation” if they got caught again in the future.  In addition, the WCPU started contacting other businesses who were under investigation and whose cases were more than 90 days old, offering them similar “agreements for compliance without citation” rather than simply closing those cases as the statute requires.

Finding this unacceptable, the Legislative Committee, with the support of the Association’s lobbyist, Bruce Bereano and the support of key Delegates, Chairman Dereck Davis (D-PG Co) and Delegate Kelly Schulz (R-Fred), took the fight to the top of DLLR.  Chuck Bode, Kurt Zanelotti, Kathy Sibbald and Bruce Bereano met with Deputy Secretary of Labor Scott Jensen and Commissioner of Labor, Ron DeJuliius on July 25, 2013.  As a result of this meeting, the Committee received a promise that the citation issued to BG Flooring, LLC would be rescinded and the proposed “agreements for compliance without citation” that other businesses were asked to enter into would be revoked.  Accordingly, on August 5, 2013, the WCPU issued a letter to BG Flooring, LLC notifying it that the citation previously issued by the WCPU was being rescinded in its entirety and that the case was being closed with no further action being taken.  Had this citation not been rescinded, BG Flooring, LLC could have been forced to pay thousands of dollars in past due taxes, penalties and interest and would have been facing significantly greater penalties if they were to receive a second citation in the future.  Other businesses who received the proposed “agreements for compliance without citation” also received similar letters revoking the proposed agreements and closing their cases.  Under the proposed agreements, these businesses would also have been required to pay thousands in past due taxes, penalties and interest.  Now all of these businesses have the opportunity to re-evaluate the status of their work force to make sure that every worker is properly classified and to avoid any problems in the future without going bankrupt in the process.

If you are facing an investigation by the WCPU or any other State or Federal agency regarding the classification of your work force, please contact the Association at 877-896-3605 or mdnvafa@msn.com .  The Association is working hard to insure that its members understand the law and are in compliance with both the State and Federal laws concerning worker classification.  In addition, the Association will continue to fight the aggressive enforcement efforts of the State of Maryland as well as the inappropriate and unfair targeting of the Association’s members by DLLR and the Comptroller of Maryland.