The Delaware Workplace Fraud statute has far reaching consequences for any Delaware contractor who uses subcontractors.  The Delaware Workplace Fraud Act only applies to the construction industry and prohibits a company from subcontracting work to another company that performs work in its “usual course of business.” 

The penalty is $1,000 for each violation (and each employee of the contracted company is a separate violation).  If the contractor violates the statute twice in a two year period, the statute states they shall be assessed a $20,000 administrative penalty for each employee and may be debarred for five years.

One troubling aspect of the statute is that an independent contractor or subcontractor is presumed to be an employee unless the contractor that hired them can prove otherwise to the "satisfaction of the Department."   The burden is on the contractor to "satisfy" the Department. 

 Another troubling aspect of the statute, which is being increasingly enforced by the Department of Labor, is the lack of a real appeal.  Once a contractor is cited, they may appeal to the Delaware Superior Court and the Court will decide based only on the Department of Labor record whether there was sufficient evidence for the Department of Labor determination.  If so, the determination and penalty stand.  We have already seen one case where the contractor did not even know they were being investigated and thus the only thing in the record is the Department of Labor’s information – there is no opportunity to provide contradictory evidence for the Court to even review.