BILL REQ. #:  H-4035.1 

READ FIRST TIME 02/05/14.   

     AN ACT Relating to a voluntary independent contractor certification; amending RCW 51.08.070, 51.08.180, 39.12.100, 49.46.010, and 82.04.360; adding new sections to chapter 51.12 RCW; adding a new section to chapter 51.44 RCW; adding a new section to chapter 50.04 RCW; creating new sections; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   (1) Beginning September 1, 2014, a person who regularly and customarily performs services at a location other than the person's own fixed business location may apply for an independent contractor exemption certificate.     
     (2) To obtain an independent contractor exemption certificate, an applicant must submit an application under oath on a form prescribed by the department and containing the following:
     (a) The applicant's name, address, and social security number;
     (b) Each trade, occupation, business, or profession for which the applicant is seeking certification;
     (c) A statement that the applicant:
     (i) Has been and will continue to be free from direction or control over the performance of the applicant's own services, both under contract and in fact; and
     (ii) Is engaged in an independently established trade, occupation, business, or profession;
     (d) The following documentation that the applicant has an independently established trade, occupation, business, or profession:     
     (i) An active and valid account with the department of revenue;
     (ii) Any active and valid license, registration, or certificate, including any insurance and bonding, required by the state for the trade, occupation, business, or profession; and
     (iii) Registration with the secretary of state, if required for the particular trade, occupation, business, or profession;
     (e) A statement that the applicant understands that he or she is not eligible for benefits under this title while working under an approved independent contractor exemption certificate unless the applicant elects coverage; and
     (f) A fee of not more than one hundred twenty-five dollars.
     (3) The department must approve an independent contractor exemption certificate if the applicant meets the requirements of this section.
     (4) An approved independent contractor exemption certificate remains active and valid for two years unless it is:
     (a) Suspended or revoked under section 3 of this act; or
     (b) Canceled by the holder of the certificate.
     (5) A holder of an active and valid independent contractor exemption certificate who applies for renewal of the certificate is presumed to meet the requirements of this section. The renewal fee must be not more than one hundred twenty-five dollars.
     (6) The holder of an independent contractor exemption certificate that has been revoked under section 3 of this act or who has been found in violation of section 4 of this act may not reapply for a certificate for two years from the date of revocation or finding of a violation.
     (7) If the department denies an initial or renewal application for an independent contractor exemption certificate, the applicant may appeal the denial to the board of industrial insurance appeals under chapter 51.52 RCW.
     (8) A person who holds an independent contractor exemption certificate may elect to be covered under this title in accordance with RCW 51.32.030.

NEW SECTION.  Sec. 2   (1) A holder of an active and valid independent contractor exemption certificate who is working under the certificate is conclusively presumed to be an independent contractor and not a worker covered under this title.
     (2) A person is working under an independent contractor exemption certificate if:
     (a) The person is performing work in the trade, occupation, business, or profession listed on the certificate; and
     (b) The employer and the certificate holder do not have a written agreement described in subsection (3) of this section that the certificate holder's status with respect to that employer is as a worker.
     (3) For a certificate holder working in the trade, occupation, business, or profession listed on the certificate to be a worker, the holder and the entity engaging the certificate holder must file an agreement with the department at the time and in the form prescribed by the department.
     (4) The decision of the department, subject to appeal, is determinative as to whether a person is working under an active and valid independent contractor exemption certificate for the purposes of this title and RCW 39.12.100, 49.46.010, 82.04.360, and section 10 of this act.

NEW SECTION.  Sec. 3   (1) The department may suspend an independent contractor exemption certificate for a specific business relationship if the department determines that the entity engaging the certificate holder exerts or retains a right to control to a degree that causes the certificate holder to violate section 1(2)(c)(i) of this act.
     (2) The department may revoke an independent contractor exemption certificate if it finds that the certificate holder:
     (a) Made misrepresentations in the application or renewal form;
     (b) Altered or amended the application or renewal form, supporting documentation, or the independent contractor exemption certificate;
     (c) Failed to cooperate with the department in providing information relevant to the continued validity of the holder's certificate; or
     (d) Does not have an independently established trade, occupation, business, or profession as required under section 1(2)(c)(ii) of this act.
     (3) A decision by the department to suspend or revoke an independent contractor exemption certificate takes effect upon issuance of the decision, subject to appeal. A suspension or revocation of the certificate does not invalidate the holder's ineligibility for benefits under this title for the period prior to the notice to the holder of the department's decision to suspend or revoke the certificate.
     (4) The department's decision to suspend or revoke an independent contractor exemption certificate may be appealed under chapter 51.52 RCW.

NEW SECTION.  Sec. 4   (1) A person may not:
     (a) Transfer to another person or allow another person to use an independent contractor exemption certificate;
     (b) Alter or falsify an independent contractor exemption certificate; or
     (c) Misrepresent the person's status as the holder of an independent contractor exemption certificate.
     (2) An employer may not:
     (a) Require a person through coercion, misrepresentation, or fraudulent means to apply for an independent contractor exemption certificate to avoid the employer's obligations under this title; or
     (b) Exert control to a degree that causes the holder of an independent contractor exemption certificate to violate section 1(2)(c)(i) of this act.
     (3) In addition to any other penalty provided under this title, a person or employer who violates this section is subject to a fine of up to one thousand dollars for each violation.
     (4) A person or employer may appeal a fine under chapter 51.52 RCW.

Sec. 5   RCW 51.08.070 and 2008 c 102 s 2 are each amended to read as follows:
     "Employer" means any person, body of persons, corporate or otherwise, and the legal representatives of a deceased employer, all while engaged in this state in any work covered by the provisions of this title, by way of trade or business, or who contracts with one or more workers, the essence of which is the personal labor of such worker or workers. Or as an exception to the definition of employer, persons or entities are not employers when they contract or agree to remunerate the services performed by an individual who:
     (1) Meets the tests set forth in ((subsections (1) through (6) of)) RCW 51.08.195 (1) through (6) or the separate tests set forth in RCW 51.08.181 for work performed that requires registration under chapter 18.27 RCW or licensing under chapter 19.28 RCW; or
     (2) Is working under an active and valid independent contractor exemption certificate.

Sec. 6   RCW 51.08.180 and 2008 c 102 s 3 are each amended to read as follows:
     (1) "Worker" means every person in this state who is engaged in the employment of an employer under this title, whether by way of manual labor or otherwise in the course of his or her employment; also every person in this state who is engaged in the employment of or who is working under an independent contract, the essence of which is his or her personal labor for an employer under this title, whether by way of manual labor or otherwise, in the course of his or her employment, or as an exception to the definition of worker, a person is not a worker if he or she:
     (a) Meets the tests set forth in ((subsections (1) through (6) of)) RCW 51.08.195 (1) through (6) or the separate tests set forth in RCW 51.08.181 for work performed that requires registration under chapter 18.27 RCW or licensing under chapter 19.28 RCW((: PROVIDED, That)); or
     (b) Is working under an active and valid independent contractor exemption certificate.
     (2) A person is not a worker for the purpose of this title, with respect to his or her activities attendant to operating a truck which he or she owns, and which is leased to a common or contract carrier.

NEW SECTION.  Sec. 7   A new section is added to chapter 51.44 RCW to read as follows:
     The independent contractor exemption certificate account is created in the state treasury. All receipts from fees under section 1 of this act and fines under section 4 of this act must be deposited into the account. Moneys in the account may be spent only after appropriation. Expenditures from the account may be used only for purposes of the independent contractor exemption certificate program.

Sec. 8   RCW 39.12.100 and 2009 c 63 s 1 are each amended to read as follows:
     For the purposes of this chapter, an individual employed on a public works project is not considered to be a laborer, worker, or mechanic when:
     (1)(a) The individual has been and is free from control or direction over the performance of the service, both under the contract of service and in fact;
     (((2))) (b) The service is either outside the usual course of business for the contractor or contractors for whom the individual performs services, or the service is performed outside all of the places of business of the enterprise for which the individual performs services, or the individual is responsible, both under the contract and in fact, for the costs of the principal place of business from which the service is performed;
     (((3))) (c) The individual is customarily engaged in an independently established trade, occupation, profession, or business, of the same nature as that involved in the contract of service, or the individual has a principal place of business for the business the individual is conducting that is eligible for a business deduction for federal income tax purposes other than that furnished by the employer for which the business has contracted to furnish services;
     (((4))) (d) On the effective date of the contract of service, the individual is responsible for filing at the next applicable filing period, both under the contract of service and in fact, a schedule of expenses with the internal revenue service for the type of business the individual is conducting;
     (((5))) (e) On the effective date of the contract of service, or within a reasonable period after the effective date of the contract of service, the individual has an active and valid certificate of registration with the department of revenue, and an active and valid account with any other state agencies as required by the particular case, for the business the individual is conducting for the payment of all state taxes normally paid by employers and businesses and has registered for and received a unified business identifier number from the state of Washington;
     (((6))) (f) On the effective date of the contract of service, the individual is maintaining a separate set of books or records that reflect all items of income and expenses of the business which the individual is conducting; and
     (((7))) (g) On the effective date of the contract of service, if the nature of the work performed requires registration under chapter 18.27 RCW or licensure under chapter 19.28 RCW, the individual has a valid contractor registration pursuant to chapter 18.27 RCW or an electrical contractor license pursuant to chapter 19.28 RCW; or
     (2) The individual is working under an active and valid independent contractor exemption certificate approved by the department of labor and industries.

Sec. 9   RCW 49.46.010 and 2013 c 141 s 1 are each amended to read as follows:
     As used in this chapter:
     (1) "Director" means the director of labor and industries;
     (2) "Employ" includes to permit to work;
     (3) "Employee" includes any individual employed by an employer, but shall not include:
     (a) Any individual (i) employed as a hand harvest laborer and paid on a piece rate basis in an operation which has been, and is generally and customarily recognized as having been, paid on a piece rate basis in the region of employment; (ii) who commutes daily from his or her permanent residence to the farm on which he or she is employed; and (iii) who has been employed in agriculture less than thirteen weeks during the preceding calendar year;
     (b) Any individual employed in casual labor in or about a private home, unless performed in the course of the employer's trade, business, or profession;
     (c) Any individual employed in a bona fide executive, administrative, or professional capacity or in the capacity of outside salesperson as those terms are defined and delimited by rules of the director. However, those terms shall be defined and delimited by the human resources director pursuant to chapter 41.06 RCW for employees employed under the director of personnel's jurisdiction;
     (d) Any individual engaged in the activities of an educational, charitable, religious, state or local governmental body or agency, or nonprofit organization where the employer-employee relationship does not in fact exist or where the services are rendered to such organizations gratuitously. If the individual receives reimbursement in lieu of compensation for normally incurred out-of-pocket expenses or receives a nominal amount of compensation per unit of voluntary service rendered, an employer-employee relationship is deemed not to exist for the purpose of this section or for purposes of membership or qualification in any state, local government, or publicly supported retirement system other than that provided under chapter 41.24 RCW;
     (e) Any individual employed full time by any state or local governmental body or agency who provides voluntary services but only with regard to the provision of the voluntary services. The voluntary services and any compensation therefor shall not affect or add to qualification, entitlement, or benefit rights under any state, local government, or publicly supported retirement system other than that provided under chapter 41.24 RCW;
     (f) Any newspaper vendor, carrier, or delivery person selling or distributing newspapers on the street, to offices, to businesses, or from house to house and any freelance news correspondent or "stringer" who, using his or her own equipment, chooses to submit material for publication for free or a fee when such material is published;
     (g) Any carrier subject to regulation by Part 1 of the Interstate Commerce Act;
     (h) Any individual engaged in forest protection and fire prevention activities;
     (i) Any individual employed by any charitable institution charged with child care responsibilities engaged primarily in the development of character or citizenship or promoting health or physical fitness or providing or sponsoring recreational opportunities or facilities for young people or members of the armed forces of the United States;
     (j) Any individual whose duties require that he or she reside or sleep at the place of his or her employment or who otherwise spends a substantial portion of his or her work time subject to call, and not engaged in the performance of active duties;
     (k) Any resident, inmate, or patient of a state, county, or municipal correctional, detention, treatment or rehabilitative institution;
     (l) Any individual who holds a public elective or appointive office of the state, any county, city, town, municipal corporation or quasi municipal corporation, political subdivision, or any instrumentality thereof, or any employee of the state legislature;
     (m) All vessel operating crews of the Washington state ferries operated by the department of transportation;
     (n) Any individual employed as a seaman on a vessel other than an American vessel;
     (o) Any individual working under an active and valid independent contractor exemption certificate approved by the department of labor and industries;
     (4) "Employer" includes any individual, partnership, association, corporation, business trust, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee;
     (5) "Occupation" means any occupation, service, trade, business, industry, or branch or group of industries or employment or class of employment in which employees are gainfully employed;
     (6) "Retail or service establishment" means an establishment seventy-five percent of whose annual dollar volume of sales of goods or services, or both, is not for resale and is recognized as retail sales or services in the particular industry;
     (7) "Wage" means compensation due to an employee by reason of employment, payable in legal tender of the United States or checks on banks convertible into cash on demand at full face value, subject to such deductions, charges, or allowances as may be permitted by rules of the director.

NEW SECTION.  Sec. 10   A new section is added to chapter 50.04 RCW to read as follows:
     Except for services subject to RCW 50.44.010, 50.44.020, 50.44.030, or 50.50.010, and notwithstanding RCW 50.04.140 and 50.04.145, "employment" does not include services performed by a person working under an active and valid independent contractor exemption certificate approved by the department of labor and industries.

Sec. 11   RCW 82.04.360 and 2010 1st sp.s. c 23 s 702 are each amended to read as follows:
     (1) This chapter does not apply to any person in respect to his or her employment in the capacity of an employee or servant as distinguished from that of an independent contractor. For the purposes of this section, the definition of employee includes those persons that are defined in section 3121(d)(3)(B) of the federal internal revenue code of 1986, as amended through January 1, 1991.
     (2) Until July 1, 2010, this chapter does not apply to amounts received by an individual from a corporation as compensation for serving as a member of that corporation's board of directors. Beginning on July 1, 2010, such amounts are taxable under RCW 82.04.290(2).
     (3) A booth renter is an independent contractor for purposes of this chapter. For purposes of this section, "booth renter" means any person who:
     (a) Performs cosmetology, barbering, esthetics, or manicuring services for which a license is required under chapter 18.16 RCW; and
     (b) Pays a fee for the use of salon or shop facilities and receives no compensation or other consideration from the owner of the salon or shop for the services performed.
     (4) A person working under an active and valid independent contractor exemption certificate approved by the department of labor and industries is an independent contractor for purposes of this section.

NEW SECTION.  Sec. 12   The department shall maintain on its web site a searchable database of holders of independent contractor exemption certificates and the trade, occupation, business, or profession listed on each certificate.

NEW SECTION.  Sec. 13   The department of labor and industries may adopt rules to implement sections 1 through 4 of this act.

NEW SECTION.  Sec. 14   Sections 1 through 4 of this act may be known and cited as the independent contractor certification act.

NEW SECTION.  Sec. 15   Sections 1 through 4 and 12 of this act are each added to chapter 51.12 RCW.

NEW SECTION.  Sec. 16   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 17   If any part of this act is found to be in conflict with federal requirements that are a prescribed condition to the allocation of federal funds to the state or the eligibility of employers in this state for federal unemployment tax credits, the conflicting part of this act is inoperative solely to the extent of the conflict, and the finding or determination does not affect the operation of the remainder of this act. Rules adopted under this act must meet federal requirements that are a necessary condition to the receipt of federal funds by the state or the granting of federal unemployment tax credits to employers in this state.