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committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

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

SPONSOR SCORC

DATE TYPED 3/16/2005 HB

SHORT TITLE Independent Contractor Status

SB

657/SCORCS/aSFL#1/

aHLHRC/aHJC

ANALYST Dunbar

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

See Narrative

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB653

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)

General Services Department (GSD)

SUMMARY

Synopsis of HJC Amendment

The House Judiciary Committee amendment to Senate Bill 657 SCORCS substitute clarifies that

the DOL is the agency for administering and enforcing the new standards including coordinating

with the construction industries division of the Regulation and Licensing department. The bill,

moreover, clarifies that RLD is the agency that is responsible for taking action to suspend, re-

voke or refuse a license issued to a contractor for violating provisions of the bill.

Synopsis of HLHRC Amendment

The House Labor and Human Resources Committee amendment to Senate Bill 657 SCORC sub-

stitute provides for an exception in establishing a presumption of employer and employee rela-

tionship in the construction industries in indicating whether a worker is an independent contrac-

Senate Bill 657/SCORCS/aSFL#1/aHLHRC/aHJC -- Page 2

tor and not an employee. The exception specifies that the presumption shall not be construed to

affect or apply to a common law or statutory action providing for recovery in torts and shall not

be construed to affect or change the common law interpretation of independent contractor status

as it relates to tort liability. Employees who are presently considered independent contractors

may not meet the criteria as an independent contractor under this bill and may need to be consid-

ered employees; however, the amendment allows them to be considered independent contractors

as it relates to tort liability.

Synopsis of SFL Amendment #1

Senate Floor Amendment #1 provides a change to the language when a contractor intentionally

and willfully reports to a state agency that an employee is an independent contractor by inserting

after state agency “or other client”.

Synopsis of Original Bill

The Senate Corporations and Transportation substitute for Senate Bill 657 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 ser

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

Senate Bill 657/SCORCS/aSFL#1/aHLHRC/aHJC -- Page 3

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:

SB 657 relates to HB 653

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