Two New Washington Laws Contractors Must Know From the 2009 Legislature
On January 14, 2010
By Scott Wolfe Jr
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As we enter it a new year, we thought it was prudent to review what the Washington legislature passed last year that is now law and affecting the construction industry.
Earlier this week, we wrote about the small amendments to the Contractor Registration Act.
More changes to Washington’s regulatory scheme passed into law in 2009 aside from these small amendments. In this post, we’ll discuss SB 5613 which authorizes L&I to issue stop work orders on employers not in compliance with workers compensation requirements, and SB 5904 which defines an “independent contractor” on public works projects.
Stop Work Orders Allowed on Contractors Who Do Not Pay Workers Compensation
SB 5613 was passed by the Washington legislature, and became effective in July 2009. This new law provides Labor & Industries with an additional mechanism to enforce the worker’s compensation requirements for contractors: stopping work.
Previously, L&I could fine employers and contractors in violation of the workers compensation provisions, but couldn’t actually force the contractor to stop work. Now, a new section has been added to RCW §51.48 giving L&I this stop work authority.
If an employer is in violation of the workers comp requirements, L&I can force the employer to stop work on that project (and other projects where there are violations) until the employer gains compliance. Becoming compliant will require the payment of any assessed penalties and interest.
What happens if the employer doesn’t stop work after being so ordered? Paragraph (4) of the new section subjects the employer to a $1000 per day penalty until the employer is in compliance.
The new section is clearly aimed at punishing employers dearly if they are not compliant with the workers compensation statutes. Where penalties alone didn’t always work in the past, now L&I can hurt contractors on jobs. If an employer must stop work, obvious problems arise: will they get paid for work done? will they be responsible for delay damages on the project? will the job be given to another contractor?
Getting clever and opening a new entity with less baggage will be of little use under the new section. Paragraph (7) contemplates this circumstance, and provides that stop work orders are effective against “any successor…business entity that has one or more of the same principals or officers…”
Independent Contractor Defined for the Purposes of Prevailing Wages
In the past, much argument has ensued on public works between Washington’s Department of Labor & Industries and contractors over whether a party or entity is an employee or an independent contractor.
The consequence to the distinction is clear. If an employee, prevailing wage rates must be paid. If an independent contractor, the prevailing wage rate may not be required.
Well, SB 5904 adds a section to RCW 39.12 to clear up the ambiguity.
Regardless of how an employer attempts to label a party/entity, they will be considered a laborer, worker or mechanic unless all of these factors are met:
- They have been and is free from control or direction over the performance of the service, but unde under the contract and in fact;
- The service provided is either outside the usual course of business for the hiring contractor or the service is performed outside the places of business for the hiring contractor;
- The party/entity is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the instant contract;
- The party/entity is responsible for filing at the next applicable filing period a schedule of expenses with the IRS;
- The party/entity has an active and valid certificate of registration with the department of revenue, and all other required registrations;
- The party/entity maintains a separate set of books or records reflecting all items of income or expense of the business; and
- The party/entity is a registered contractor, if required.
Read the passed bill’s full text here.
This article was originally posted on Wolfe Law Group’s topic-specific Northwest Construction Law Blog.
About the Author: Scott Wolfe Jr
Scott Wolfe, Jr. obtained his J.D. degree from Loyola University of New Orleans, and his B.A. from Southern Methodist University in Dallas, TX. In 2006, 2007, 2008 and 2009, Scott was recognized as a Leader in Law by CityBusiness Magazine. The son and grandson of general contractors, Scott is a construction litigator in the Pacific Northwest, and the founding member of the bi-coastal law firm, Wolfe Law Group. Scott is also the founder and CEO of Express Lien, Inc., a legal document preparation service for contractors. In 2008, City Business Magazine recognized Scott as one of its Innovators of the Year for the Express Lien concept. As an entrepreneur himself, Scott has a strong background in business and commercial transactions and laws. He focuses his practice on the legal issues facing the construction industry, and has represented clients in multi-million dollar construction disputes in litigation and alternative dispute resolution proceedings. Scott is a LEED AP.
