WorkersFirst

5/10/2007 - Congress examines definition of worker

Congress examines definition of worker

By Laura Onstot
Medill News Service

WASHINGTON - Gonzalo Valencio began framing houses in King County as a union employee 18 years ago.

But in late 2001, with the economy slowing and work harder to find, Valencio was offered a job on the condition he become an independent contractor.

In Washington state, that means he's in business for himself and may not qualify for workers' compensation or unemployment if he is injured or laid off.

But Valencio said he found himself being told when to work, what to do and whom to work for - much like an employee.

He told his story Tuesday at a Joint House subcommittee hearing in Washington chaired by Rep. Jim McDermott, D-Seattle. The hearing explored the issue of independent contractors who are treated like employees.

Valencio declined to identify his employer.

He is one of the growing number of people who act as employees but are classified as independent contractors, particularly in the construction industry, testified Kelly Pinkham, assistant director of the Center for Full Employment and Price Stability at the University of Missouri, Kansas City.

His organization studied the phenomenon in Illinois. Audits performed in 2001 revealed that more than 14 percent of that state's employers incorrectly classified workers as independent contractors. By 2005, the number had grown to 20 percent.

The issue has not been studied in Washington state. But this month, Gov. Christine Gregoire signed a bill to create a legislative task force to examine legal problems in the construction industry, including tax evasion through misclassifying workers.

In an interview, Amy Brackenbury, human-resources analyst for the Building Industry Association of Washington, said that while some employers may misclassify workers to avoid taxes, others don't understand the rules.

In Washington state, two statutes define whether someone is an independent contractor or an employee. Criteria can include such things as keeping your own books and having supervisory responsibilities.

John Carlson, president of Carlson Builders in Lakebay, Pierce County, said in an interview that independent contractors allow him to hire people only when needed.

"It makes no sense from an economical point of view to not use independent contractors," he said.

John Satagaj, president of the Small Business Legislative Council in Washington, D.C., testified that lawmakers must avoid creating barriers for people who want to be independent contractors.

John Little, political director for the Pacific Northwest Regional Council of Carpenters in Kent, said clarification and enforcement of the independent contractor status would benefit only employees.

"This misclassification is creating a race to the bottom that's not allowing our employers to compete on a level playing field," he said in an interview.

Rebecca Smith of the National Employment Law Project testified that immediate fixes would include better enforcement and incentives to report abuses by making the federal investigative process more anonymous.

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