6-page (4sheets of paper) HICPA Compliant Contract
– PA Construction Workplace Misclassification Act (CWMA)
2-page (1sheet of paper) CWMA Compliant Contract
Are You Using a Pennsylvania's Construction Workplace
Misclassification Act (CWMA) Compliant Contract With Your Subs?
Effective February 10, 2011, ALL construction companies (residential, commercial, industrial – new construction and renovations) using independent contractors (subs) must comply with PA’s Construction Workplace Misclassification Act (CWMA). If you are subject to HICPA, now you are also subject to CWMA.
What happens if I do not have a CWMA Compliant contract?
If you don’t comply with CWMA, your subs become your employees and you are responsible for withholding federal, state and local income taxes, withholding one-half and paying the other one-half of Social Security and Medicare taxes, paying unemployment compensation and workman’s compensation insurance premiums – not to mention fines and penalties under CWMA.
How do I comply with CWMA?
To keep your sub an independent subcontractor (and not an employee) you must have a written CWMA compliant independent contractor agreement with your sub. The written contract must include certain specific items and prohibits others. The sub must be free from your control or direction over the performance of his services, both under the contract and in fact. Your sub must maintain at least $50,000 in liability insurance. And, your sub must be “customarily engaged in an independently established trade, occupation, profession or business.” In other words: possesses his own tools; realize a profit or suffer a loss as a result of his performance of services through a business in which he has a proprietary interest; maintain a separate business location; AND, have previously worked as or hold himself out to the public as a “bona fide independent contractor”.
To make compliance with the new CWMA requirements simpler for construction companies using subs, HICPA Compliance LLC has developed a 2 page (on 1 sheet of paper), easy to use contract that is suitable for use by anyone in the construction industry – sign the basic independent contractor agreement once and use the included Project Forms whenever needed. This contract is being made available through this website, at an affordable price (and free with the purchase of the right to use the HICPA Home Improvement Contractor Contract) to all PA contractors. Click here to order this easy-to-use contract.
Because contractors often use the same subs repeatedly, it is easier to have one basic Agreement for Independent Contractor Services and to deal with each job on a project by project basis.
- 2 pages (on 1 sheet of paper) for pre-approval of the sub as an independent contractor qualified under CWMA. Signing this doesn’t obligate you to offer any project to the sub in the future (or require the sub to accept any project if and when offered later) but after it is signed, simply keep this in your files. It only needs to be signed once and it is good forever.
- After the Agreement for Independent Contractor Services is signed, use a copy of Page 3, the Project Form, for every project thereafter.
- You and the sub sign the Agreement for Independent Contractor Services only once. You and the sub sign a new Project Form each time you use the sub’s services!
- Written by the late Yale Law School graduate, Charles E. Shoemaker, Jr., Esquire
- Approved and used by 46-year building industry veteran, Frank A. Alexander
- CWMA Compliance Requirements of acknowledgment by your sub
- Project Form in which you and your sub:
- Identify the customer and job
- Describe the work the sub is to perform and any phases into which the work is divided, especially if there are deadlines for the phases and/or payments based upon completion of the phases.
- Indicate the total project price. Although “time and materials” contracts are not specifically prohibited by CWMA, remember that your sub must “realize a profit or suffer a loss as a result of his performance of services through a business in which he has a proprietary interest”. This standard is much easier to meet if your project for the sub has a fixed, total dollar amount associated with it.
- Payment schedule. If there is only one payment and it is to be made on completion, fill in “100%” and the amount. Otherwise, if payments are to be made based upon dates or phases or percentage of completion, so indicate, and fill in the amount.
- Your right to require the sub to provide you with any information you request.
- Start date and completion date. If there are phases or percentage completion milestones, so indicate, and fill in the applicable date.
Congratulations! You have satisfied the written agreement of CWMA! REMEMBER – It is still your obligation to make certain that the other requirements of CWMA are true and remain true throughout your relationship with the sub!
This contract package includes the Agreement for Independent Contractor Services and Project Form, along with complete instructions for proper completion!