House File 348 - Introduced HOUSE FILE 348 BY B. MEYER A BILL FOR An Act prohibiting the misclassification of employees as 1 independent contractors, providing penalties, and including 2 applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 2494HH (1) 91 je/js
H.F. 348 Section 1. Section 84A.5, subsection 3, Code 2025, is 1 amended to read as follows: 2 3. The department of workforce development is responsible 3 for administration of unemployment compensation benefits 4 and collection of employer contributions under chapter 96 , 5 providing for the delivery of free public employment services 6 established pursuant to chapter 96 , other job placement and 7 training programs established pursuant to section 84A.6 , 8 employment agencies under chapter 84I , enforcement of chapter 9 95 relating to misclassification, and the delivery of services 10 located throughout the state. 11 Sec. 2. NEW SECTION . 95.1 Definitions. 12 As used in this chapter, unless the context otherwise 13 requires: 14 1. Department means the department of workforce 15 development. 16 2. Employee means an individual who performs services in 17 this state for an employer in return for remuneration and who 18 is considered an employee under regulations or guidelines of 19 the federal internal revenue service in effect as of the date 20 of an alleged misclassification. 21 3. Employer means a person who employs an individual in 22 this state for wages. 23 4. Independent contractor means an individual who 24 performs services in this state for an employer in return for 25 remuneration and who is considered an independent contractor 26 under regulations or guidelines of the federal internal 27 revenue service in effect as of the date of an alleged 28 misclassification. 29 5. Misclassify or misclassification means to classify an 30 individual for employment purposes as an independent contractor 31 rather than an employee, contrary to regulations or guidelines 32 of the federal internal revenue service in effect as of the 33 date of an alleged misclassification, with the effect of 34 denying the individual eligibility for an employment benefit 35 -1- LSB 2494HH (1) 91 je/js 1/ 4
H.F. 348 provided by law or for a government program. 1 Sec. 3. NEW SECTION . 95.2 Misclassification of employees 2 prohibited. 3 An employer shall not willfully misclassify an individual. 4 Sec. 4. NEW SECTION . 95.3 Civil penalty procedures. 5 1. An employer who violates section 95.2 shall be subject 6 to a civil penalty of up to five thousand dollars per 7 misclassified individual for a first offense, up to seven 8 thousand five hundred dollars per misclassified individual 9 for a second offense, and up to ten thousand dollars per 10 misclassified individual for each subsequent offense. 11 2. The department shall provide written notice to an 12 employer prior to imposition of a civil penalty under this 13 section. An employer may contest and seek judicial review of a 14 determination of the department under this chapter pursuant to 15 chapter 17A; however, for purposes of this section, an employer 16 shall bear the burden to demonstrate by a preponderance of the 17 evidence that the employer did not violate section 95.2. 18 3. Upon a final determination of the department that an 19 employer violated section 95.2 and the conclusion of the period 20 for any appeals, all of the following apply: 21 a. The department shall bring an action in district court to 22 collect the penalties provided in this section. The department 23 shall remit any penalties collected to the treasurer of state 24 for deposit in the general fund. 25 b. The department shall refer the violation to a county 26 attorney. A county attorney shall not be bound by any 27 determination of the department. 28 Sec. 5. NEW SECTION . 95.4 Criminal penalty. 29 In addition to the civil penalties provided in section 95.3, 30 an employer who violates section 95.2 commits a class D 31 felony. 32 Sec. 6. NEW SECTION . 95.5 Enforcement rules. 33 1. The department shall enforce this chapter. The 34 department may establish additional procedures to implement 35 -2- LSB 2494HH (1) 91 je/js 2/ 4
H.F. 348 this chapter and may employ inspectors and any other personnel 1 deemed necessary to implement this chapter, subject to the 2 provisions of chapter 8A, subchapter IV. 3 2. The department shall adopt rules pursuant to chapter 17A 4 to administer this chapter. 5 Sec. 7. APPLICABILITY. This Act applies to 6 misclassification, as defined in section 95.1, as enacted by 7 this Act, of an individual by an employer occurring on or after 8 the effective date of this Act. 9 EXPLANATION 10 The inclusion of this explanation does not constitute agreement with 11 the explanations substance by the members of the general assembly. 12 This bill prohibits an employer from willfully 13 misclassifying an individual who performs services for 14 the employer in return for remuneration as an independent 15 contractor rather than an employee with the effect of denying 16 the individual eligibility for an employment benefit provided 17 by law or for a government program. Whether an individual 18 performs services as an employee or independent contractor 19 is determined under regulations or guidelines of the federal 20 internal revenue service in effect as of the date of an alleged 21 misclassification. The bill is enforced by the department of 22 workforce development. 23 An employer who violates this prohibition shall be subject 24 to a civil penalty of up to $5,000 per misclassified individual 25 for a first offense, up to $7,500 per misclassified individual 26 for a second offense, and up to $10,000 per misclassified 27 individual for each subsequent offense. 28 The department shall provide written notice to an employer 29 prior to imposition of a civil penalty. An employer may 30 contest and seek judicial review of a determination of 31 the department pursuant to Code chapter 17A. An employer 32 shall bear the burden of proving that the employer did not 33 misclassify an individual. Upon a final determination of the 34 department that a violation occurred and the conclusion of the 35 -3- LSB 2494HH (1) 91 je/js 3/ 4
H.F. 348 period for any appeals, the department shall bring an action in 1 district court to collect the civil penalties for deposit in 2 the general fund and refer the violation to a county attorney. 3 A county attorney shall not be bound by any determination of 4 the department. 5 An employer who misclassifies an individual in violation of 6 the bill commits a class D felony. A class D felony is 7 punishable by confinement for no more than five years and a 8 fine of at least $1,025 but not more than $10,245. 9 The bill applies to misclassification of an individual by an 10 employer occurring on or after the effective date of the bill. 11 -4- LSB 2494HH (1) 91 je/js 4/ 4