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HB 632

Labor and Employment - Workplace Fraud - Application (Maryland Workplace Fraud Act of 2025)

2025 Regular Session Introduced by Gabriel Acevero and 9 co-sponsors

Expands Maryland's Workplace Fraud Act to all private-sector employers, using the ABC test to enforce proper worker classification and coordinate multi-agency penalties.

Hearing 2/13 at 1:00 p.m.
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Bill Summary · HB 632

Summary — HB 632: Labor and Employment — Workplace Fraud — Application

(Maryland Workplace Fraud Act of 2025)

Status: Assigned to Economic Matters; hearing scheduled 2/13 at 1:00 p.m.
Introduced (House): January 23, 2025. Effective date: October 1, 2025 (as written).

Purpose / Intent

HB 632 expands Maryland’s existing Workplace Fraud Act (enacted for construction and landscaping industries) to apply to all private‑sector employers. The bill is intended to strengthen enforcement against worker misclassification (use of independent‑contractor status where an employment relationship exists) across the entire private economy.

Key provisions

  • Expands the scope of the Workplace Fraud Act so that the Commissioner of Labor and Industry may investigate and enforce worker classification rules for all private‑sector employers rather than only construction and landscaping businesses.
  • Repeals the current statutory limitation that confines the Act to construction and landscaping industries and updates cross‑references and definitions (including revision of the definition of “construction services” and related statutory references).
  • Continues use of the ABC test to determine whether an individual is an employee (must meet all three prongs: free from control, customarily engaged in an independent business, and work is outside the usual course/place of business).
  • Keeps existing enforcement structure: DLI enforces the Act, can refer matters to Division of Unemployment Insurance (DUI) and the Comptroller for audit and tax enforcement.
  • Preserves existing civil penalties and escalations for knowing violations (see below).

Who is affected

  • All private‑sector employers and their workers in Maryland: MD Labor estimates this expansion would extend coverage from roughly 19,829 establishments (construction + landscaping) to about 186,803 establishments — roughly two million additional workers.
  • Small businesses are expected to be meaningfully affected (per fiscal note).
  • State agencies involved in enforcement and tax auditing (MD Department of Labor, Workers’ Compensation Commission, Division of Unemployment Insurance, Comptroller).

Enforcement, penalties, and related mechanisms

  • The Act uses the ABC test to establish presumptive employment status for enforcement.
  • Current penalties under the Workplace Fraud Act include civil fines up to $10,000 per misclassified employee for knowing violations, with higher penalties (including doubling and up to $20,000 per employee) for repeat offenders.
  • Enforcement is coordinated with the Joint Enforcement Task Force on Workplace Fraud (established by Executive Order) and may result in referrals for tax and UI audits.

Fiscal and operational impact (Maryland)

  • MD Department of Labor: special fund expenditures increase by at least $747,300 in FY 2026 with ongoing costs; MD Labor reports need for additional investigators (estimate: 13–25 new DLI positions depending on investigation coverage).
  • Federal and general fund audit costs (Comptroller, DUI, MD Labor) estimated to rise by ~$295,700 beginning FY 2026 (ongoing).
  • Potential significant increases in State and local tax revenues from improved tax/UI compliance and assessed penalties, though actual revenue is uncertain.
  • Local impact: minimal increase in WCC assessment costs to insurers; potential increase in local income tax revenue.

Procedural / timeline notes

  • Introduced and first read January 23, 2025; assigned to Economic Matters; hearing on 2/13 at 1:00 p.m.
  • Bill text indicates an effective date of October 1, 2025.
  • Implementation will require MD Labor to scale enforcement capacity and coordinate interagency audits and referrals.

Additional context

  • The Workplace Fraud Act (Chapter 188 of 2009) previously applied only to construction and landscaping; HB 632 represents a statutory broadening of that enforcement tool to the entire private sector to address misclassification-related wage, benefit, unemployment, and tax issues.

Compiled from official sources — confirm details with the bill’s official record.

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