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F I S C A L I M P A C T R E P O R T

SPONSOR HLHRC

DATE TYPED 3/7/2005 HB 653/HLHRCS

SHORT TITLE Independent Contractor Status

SB

ANALYST Dunbar

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates SB657

SOURCES OF INFORMATION

LFC Files

Responses Received From

Economic Development Department (EDD)

Department of Labor (DOL)

NM Department of Transportation (NMDOT)

NM Public Education Department (NMPED)

Division of Vocational Rehabilitation (DVR)

NM Corrections Department (NMCD)

SUMMARY

Synopsis of Bill

House Labor Human Resources Committee Substitute for House Bill 653 provides criteria for

determining whether a worker is an employee or an independent contractor within those con-

struction industries subject to the Construction Industries Licensing Act.

A person providing labor or services for compensation shall be considered an employee unless

each of the following standards are met that would be indicative of an “independent contractor”:

•

Controlling the manner of providing services;

•

Obtaining necessary business registrations or licenses;

•

Furnishing tools or equipment necessary to provide the labor or services;

•

Having authority to hire and fire;

•

Receiving payment on periodic retainer or on project completion; payment for labor or

services is made upon completion of the performance of specific portions of a project or is

House Bill 653/HLHRCS Page 2

made on the basis of a periodic retainer; and

•

Engaging in an independently established business

A person is engaged in an independently established business when four or more of the follow-

ing circumstances exist:

•

Services provided outside the home or from an area of the home set aside for that purpose

•

Business cards are provided or membership in a professional trade organization

•

Telephone or email listings are separate from person listings

•

Written contracts are used

•

Services are provided to two or more persons during a year

•

Financial responsibility is assumed for errors and omissions

The Bill makes misreporting an independent contractor a misdemeanor with a $5,000 fine and

maximum six months in jail and provides for termination of the employer’s license(s).

Significant Issues

The committee substitute addressed all concerns of the NMDOT and the Division of Vocational

Rehabilitation that were noted in the previous fiscal impact report.

FISCAL IMPLICATIONS

DVR notes that the bill is consistent with IRS rules determining status and that substitute bill is

no longer in conflict with operations of the New Mexico Division of Vocational Rehabilitation

RELATIONSHIP:

Committee Substitute HB653 duplicates SB657.

TECHNICAL ISSUES

Pursuant to §51-1-42 Employers are liable for UI employee taxes. The Bill should provide DOL,

UI Tax Section, with courtesy notification of a conviction of improper reporting by an Employer,

therefore allowing the Department to pursue unpaid UI taxes and penalties.

The Labor Department Statutes at NMSA 1978 § 51-1-42 (F) (5) (a,b,c) set forth certain criteria

for determining whether an employer-employee relationship exists. It is unclear whether this bill

is intended to override existing test for making such a determination.

OTHER SUBSTANTIVE ISSUES

Provides that intentionally or willfully treating or listing an employee as an independent contrac-

tor, makes employer guilty of misdemeanor and subject to $5000.00 fine or imprisonment not to

exceed six month or both. Also provides that a conviction for violating the four out of five re-

quirement test is grounds for commission to revoke, suspend, or refuse to renew license.

BD/lg:sb