Understanding Worker Misclassification: Critical Insights from a Commercial Construction Lawyer in Philadelphia

If you’re running a construction company in Pennsylvania and treating workers as independent contractors when they should be employees, you’re walking a legal tightrope that could cost your business hundreds of thousands of dollars.
In 2024, BLLC investigated 639 Act 72 cases, issuing fines totaling $1,031,398 and protected 1,883 workers misclassified by 362 contractors.
The Construction Workplace Misclassification Act, commonly known as Act 72, has teeth—and Pennsylvania’s Department of Labor & Industry is using them more aggressively than ever. Whether your construction projects are in Center City Philadelphia or out in Conshohocken, the law applies equally, and ignorance isn’t a defense. Understanding these regulations isn’t just about compliance; it’s about protecting your business from devastating financial penalties and potential criminal charges.

💡 Pro Tip: Document every independent contractor relationship with a detailed written contract before work begins—verbal agreements or contracts signed after the fact won’t protect you from Act 72 violations.

Don’t let worker misclassification under Pennsylvania’s Act 72 become a costly mistake for your construction business. Reach out to Davis Bucco & Makara today to ensure your practices comply with the law and protect both your operations and reputation. Call us at 610-238-0880 or contact us online for tailored legal guidance.

Pennsylvania’s Construction Workplace Misclassification Act: What Every Contractor Must Know

The Construction Workplace Misclassification Act (Act 72) which went into effect on Feb. 10, 2011, establishes a definition of "independent contractor" for purposes of workers’ compensation, unemployment compensation, and worker classification in the construction industry.
This law creates a presumption that construction workers are employees unless specific criteria are met.
For a construction worker to be considered an independent contractor: You have to have a written contract with the person or business you work for
, and
Your business location must be separate from the location of the business or person that hired you to perform the construction work; and You must previously have worked as an independent contractor, or hold yourself out as available and able to work as an independent contractor
. A commercial construction lawyer in Philadelphia can help ensure your contractor agreements meet these stringent requirements, as even minor oversights can lead to significant penalties.

💡 Pro Tip: The written contract requirement is non-negotiable—even if all other criteria are met, the absence of a written agreement automatically classifies the worker as an employee under Act 72.

The Enforcement Process: From Complaint to Costly Consequences

Understanding how Act 72 violations are discovered and prosecuted helps construction companies prepare for and prevent investigations. The enforcement timeline typically unfolds rapidly once a complaint is filed, and having a commercial construction lawyer in Philadelphia guide you through the process can mean the difference between a manageable settlement and business-threatening penalties.

• Initial Complaint: Workers, competitors, or other agencies can file complaints online at PA.gov, by fax to 717-787-0517, or email to RA-LI-SLMR-LLC@pa.gov

• BLLC Investigation: The Bureau of Labor Law Compliance investigates within 30-60 days, reviewing contracts, payment records, and interviewing workers

• Referrals from Other Agencies:
  DLI has increased the number of site visits and is receiving increased referrals of cases from the Office of Unemployment Compensation Tax Services

• Penalty Assessment:
  Under Act 72, employers may face civil penalties of up to $1,000 for first offenses and up to $2,500 for subsequent violations

• Criminal Prosecution: In severe cases, the Attorney General’s Fair Labor Section may pursue criminal charges, marking a significant escalation in enforcement

💡 Pro Tip: The form must be completed within 20 minutes, or the system will timeout when filing online complaints, so complainants often come prepared with detailed documentation—assume any investigation will be thorough.

Protecting Your Construction Business: How Davis Bucco & Makara Can Help Navigate Act 72 Compliance

When facing potential Act 72 violations, swift action and experienced legal counsel are essential. Davis Bucco & Makara understands the complexities of Pennsylvania’s Construction Workplace Misclassification Act and can help construction companies throughout the Philadelphia region develop compliant contractor relationships.
Since its enactment in 2011, the Department of Labor & Industry has identified violations of Act 72 by more than 1,250 construction contractors, resulting in cumulative fines exceeding $4 million.
Our team works with construction companies to review existing contractor agreements, implement proper classification procedures, and defend against misclassification claims. Whether your projects span from Philadelphia to the Main Line suburbs, having a commercial construction lawyer in Philadelphia who understands both the law and the construction industry can protect your business from joining these costly statistics.

💡 Pro Tip: Proactive compliance reviews cost far less than defending against misclassification claims—invest in proper legal guidance before problems arise, not after.

The Real Cost of Misclassification: Beyond the Fines

While the direct penalties under the Construction Workplace Misclassification Act are substantial, they represent just the tip of the iceberg for construction companies caught violating the law.
This may be done to reduce payroll and other costs
, but the strategy often backfires spectacularly. Beyond the immediate fines, companies face liability for unpaid unemployment compensation taxes, workers’ compensation premiums, and potential federal tax violations. The ripple effects can destroy a company’s reputation, making it difficult to bid on public projects or maintain relationships with general contractors who can’t risk association with non-compliant subcontractors. A commercial construction lawyer in Philadelphia can help calculate the true cost of misclassification versus proper employment practices.

Recent Enforcement Trends Show Increasing Scrutiny

As of October 1, 2023, BLLC has collected $301,454 in Act 72 fines, compared to $202,942 within the same timeframe in 2022 — a 33% increase
, demonstrating the state’s intensified focus on enforcement. This trend continued into 2024, with record-breaking penalties. The Construction Workplace Misclassification Act isn’t just another regulation gathering dust—it’s actively enforced with increasing vigor. Construction companies operating anywhere from Philadelphia’s booming development areas to projects in Montgomery County must recognize that the risk of detection and prosecution has never been higher.

💡 Pro Tip: The recent trend demonstrates a significant emphasis to investigate and prosecute leads that DLI receives from complaints made by laborers, findings during construction site visits, and, most significantly, referrals from other government agencies —assume every interaction with state agencies could trigger an Act 72 review.

Criminal Prosecution: When Misclassification Becomes a Crime

What many Pennsylvania construction companies don’t realize is that worker misclassification isn’t just a civil matter—it can lead to criminal charges.
Pennsylvania recently made national headlines for seeking criminal charges against a York County drywaller for an alleged violation of Act 72, the Construction Workplace Misclassification Act. This will be the first time that criminal charges have been levied against a contractor under the act.
The stakes have dramatically increased, and what once might have resulted in a fine could now lead to criminal prosecution. Working with a commercial construction lawyer in Philadelphia who understands both the civil and criminal implications of Act 72 violations is no longer optional—it’s essential for protecting both your business and your personal freedom.

The Role of the Attorney General’s Fair Labor Section

Prosecution of the matter will be handled by the Delaware County District Attorney’s Office with assistance from the Fair Labor Section of Pennsylvania’s Office of Attorney General.
This collaboration between state and local prosecutors signals a new era of enforcement.
If you believe you have been misclassified as an independent contractor and wish to file a complaint, you may contact the Fair Labor Section at wagetheft@attorneygeneral.gov, or you may file a complaint with the department of Labor and Industry
. The multiple avenues for complaints and the coordination between agencies mean that construction companies face scrutiny from multiple directions.

💡 Pro Tip: Criminal charges can be filed against individual owners and managers, not just the company—personal liability makes proper classification procedures a matter of individual protection, not just business compliance.

Frequently Asked Questions

Understanding Act 72 Compliance

Construction companies throughout Pennsylvania struggle with the complexities of worker classification, and the Construction Workplace Misclassification Act raises numerous questions. Here are the most critical concerns we address for our construction industry clients.

💡 Pro Tip: Keep detailed records of all worker classifications and the reasoning behind them—documentation is your first line of defense in any investigation.

Navigating Enforcement and Penalties

With enforcement ramping up dramatically, understanding the investigation process and potential consequences helps construction companies prepare for and prevent violations of the Construction Workplace Misclassification Act.

💡 Pro Tip: Act 72 applies to all construction companies working on all types of projects—public, private, residential or commercial —there are no exceptions based on project type or size.

1. What specific criteria must be met for a construction worker to qualify as an independent contractor under Pennsylvania’s Act 72?

Under the Construction Workplace Misclassification Act, three specific criteria must be met: First, there must be a written contract in place before work begins. Second, the contractor must have a business location separate from your company’s location. Third, the worker must have previously worked as an independent contractor or actively market themselves as available for independent contractor work. All three criteria must be satisfied—missing even one automatically classifies the worker as an employee.

2. How are Act 72 violations typically discovered, and what triggers an investigation?

Violations are commonly discovered through worker complaints, referrals from the Office of Unemployment Compensation Tax Services during routine audits, construction site visits by L&I inspectors, and increasingly through inter-agency information sharing. Triggers include workers filing for unemployment benefits, workplace injury claims, and competitor complaints. The state has significantly increased coordination between agencies, making detection more likely than ever.

3. Can a construction company face both civil and criminal penalties for the same Act 72 violation?

Yes, Pennsylvania can pursue both civil penalties (fines up to $2,500 per violation) and criminal charges for the same misclassification violation. The state made headlines with its first criminal prosecution under Act 72, signaling aggressive enforcement. Criminal charges may be handled by local District Attorneys with assistance from the Attorney General’s Fair Labor Section, adding another layer of legal jeopardy beyond monetary fines.

4. What should a construction company do if they receive notice of an Act 72 investigation?

Immediately contact a commercial construction lawyer in Philadelphia experienced in Act 72 matters. Do not attempt to retroactively create or modify contracts, as this could lead to additional charges. Gather all existing documentation, including contracts, payment records, and evidence of the worker’s independent business operations. Respond to the investigation professionally and timely, as cooperation can sometimes lead to reduced penalties. Most importantly, conduct an immediate review of all other contractor relationships to identify and correct any additional compliance issues.

5. Are there any exceptions or safe harbors under Act 72 for small construction companies or specific trades?

No, Act 72 applies uniformly to all construction companies regardless of size, trade, or project type—whether residential, commercial, public, or private. The law covers everything from large general contractors in Philadelphia to small specialty subcontractors in surrounding counties. There are no exemptions based on company size, revenue, or number of workers. This universal application means every construction business must ensure full compliance with the classification requirements.

Work with a Trusted Construction Lawyer

Navigating Pennsylvania’s Construction Workplace Misclassification Act requires more than just understanding the law—it demands practical experience with construction industry practices and relationships with state enforcement agencies. The consequences of misclassification extend far beyond fines, potentially threatening your business’s ability to operate and even your personal freedom. Whether your construction projects are in Philadelphia’s bustling market or extend throughout southeastern Pennsylvania, having knowledgeable legal counsel ensures your worker classification practices protect both your business and your workers’ rights. Don’t wait for a complaint or investigation to seek guidance—proactive compliance is always more cost-effective than reactive defense.

Don’t let Act 72 trip up your Pennsylvania construction business. It’s time to act smart and stay compliant with the help of Davis Bucco & Makara. Give us a ring at 610-238-0880 or contact us to steer clear of costly penalties.