LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 6543 NOTE PREPARED: Dec 10, 2024
BILL NUMBER: HB 1181 BILL AMENDED:
SUBJECT: Worker Classification on Public Projects.
FIRST AUTHOR: Rep. Moseley BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
FEDERAL
Summary of Legislation: Wage Reports: The bill requires a contractor in any contractor tier except for tier
1 (a general or prime contractor) on a: (1) public works project; or (2) tax advantaged construction project;
to complete a weekly report of wages and hours of the contractor's employees who work on the project.
Labor Investigator: The bill also requires the Department of Labor (DOL) to employ an investigator to
investigate complaints of employee misclassification. It provides that the investigator shall be located at the
Marion County prosecuting attorney's office. It also extends certain protections to an employee who reports,
complains, or testifies about employee misclassification.
Effective Date: July 1, 2025.
Explanation of State Expenditures: Labor Investigator: The bill would increase expenditures for the
Department of Labor (DOL) to hire an investigator. Assuming the DOL hires the investigator at the same
salary level as a Department of Labor IOSHA inspector 4, minimum staff costs would be $84,254 in FY 2026
and $87,985 in FY 2027. Actual costs will depend on staffing decisions, and could increase if entry level
staffing is not used. Ultimately, the source of funds and resources required to satisfy the requirements of this
bill will depend on legislative and administrative actions.
Wage Reports: If payroll reporting by contractors on public works projects and tax-advantaged construction
projects results in less misclassification of workers as independent contractors, labor costs for these
construction projects may increase. State agencies, including the Department of Labor, may experience
increased workload to inspect and verify contractors’ payroll reports for tax-advantaged construction
projects.
Explanation of State Revenues: Labor Investigator: If the investigator uncovers cases of misclassified
workers, additional income taxes and taxes owed to the Unemployment Insurance Trust Fund may be
collected. Civil and criminal penalties may also occur. If additional court cases occur and fines are collected,
revenue to the Common School Fund (from fines) and the state General Fund (from court fees) would
increase.
HB 1181 1 Additional Information - Employee misclassification is the practice of labeling workers as independent
contractors rather than employees. The practice sometimes allows employers to avoid paying certain
employee-related expenses, including various taxes on workers as well as the expense of covering them for
the purposes of worker’s compensation and unemployment insurance.
The bill makes it a Class A infraction for an employer to discharge or discriminate against an employee who
reports or testifies concerning worker misclassification. The maximum judgment for a Class A infraction is
$10,000, which would be deposited in the state General Fund. However, any additional revenue is likely to
be small.
If the investigator uncovers additional cases of employee misclassification, additional civil and criminal
penalties may also occur due to violations of the following provisions:
• Minimum Wage Violations (IC 22-2-2-11): Class A infraction (knowing and intentional violations);
Class B misdemeanor (additional violations); Class C infraction for paying less than the minimum
wage or failure to keep adequate wage records.
• Workers’ Compensation Violations (IC 22-3-7-34.3): $100 per day civil penalty for employers who
do not provide proof of compliance with worker’s compensation coverage for employees. Civil
penalties collected under IC 22-3-7-34.3 are deposited in the Worker’s Compensation Supplemental
Administrative Fund.
• Unemployment Insurance Violations (IC 22-4-34): Class C misdemeanor for false statements or
representations, failure to disclose, or attempting to avoid or reduce any contribution of other
payment from an employing unit.
• Income Tax Evasion (IC 6-3-6-11): Level 6 Felony for failure to make required return, or making
false statements in a return with the intent to defraud the state or evade the payment of the tax.
Explanation of Local Expenditures: Labor Investigator: The investigator will be located at the Marion
County prosecuting attorney’s office, and the office may see increased costs for office space, materials, and
supplies.
Wage Reports: If payroll reporting by contractors on public works projects and tax-advantaged construction
projects result in less misclassification of workers as independent contractors, labor costs for these
construction projects may increase. Local units may experience increased workload to inspect and verify
contractors’ payroll reports for tax-advantaged construction projects.
Explanation of Local Revenues: If additional court actions are filed and a judgment is entered, local
governments would receive revenue from court fees.
State Agencies Affected: Department of Labor; agencies involved in public works projects or tax-
advantaged construction projects.
Local Agencies Affected: Marion County prosecuting attorney’s office; trial courts; local law enforcement
agencies, local units involved in public works projects or tax-advantaged construction projects.
Information Sources: IC 22-2-2-11; IC 22-3-7-34.3; IC 22-4-34; IC 6-3-6-11; State Budget Agency;
State Personnel Department. Job Code Listings. October 2024.
https://www.in.gov/spd/files/State-of-Indiana-job-code-listing.pdf.
HB 1181 2 Fiscal Analyst: Camille Tesch, 317-232-5293.
HB 1181 3