Lathrop bill aids construction business

[Omaha Steve]

This is a good bill for Ne.

http://www.lavistasun.com/site/tab7.cfm?newsid=19408975&BRD=2712&PAG=461&dept_id=557009&rfi=6

Lathrop bill aids construction business
By: Jon Burleson
03/20/2008
Updated 03/20/2008 10:35:27 AM EDT

"Employee misclassification occurs when an employer mislabels an employee as an independent contractor," Lathrop said. "Such a misclassification exempts the employer from certain tax obligations and liability."


Senator Steve Lathrop


Because of these misclassifications, Lathrop said the State of Nebraska has lost millions of dollars in tax revenue.
By not classifying employees correctly, Lathrop said it allows contractors an unfair advantage in bidding projects. With no withholding tax or unemployment insurance payments among other expenses to be paid, Lathrop said contractors can underbid companies that are following the law.

Jim Steele, risk manager of Falewitch Construction Services in Papillion, said some companies are playing against a stacked deck.

"It's like playing cards with someone and they keep winning," Steele said. "Only you notice that they are holding more aces than are supposed to be in a deck."

Steele traveled to Lincoln to testify before state senators. He told lawmakers that misclassification of employees, especially in the construction field, allows an employer to avoid federal and state taxes, safety training costs to meet OSHA requirements, unemployment insurance, workers compensation insurance and general liability insurance.

Also, he added, employees are cheated out of benefits such as health insurance, retirement benefits, paid vacation and disability insurance.

John Falewitch, owner of FCS, said that such companies have undercut his bids on projects by as much as 30 percent. In the last week, Falewitch said he lost four bids by more than 18 percent each to companies he believed used the misclassification advantage. The loss of those bids translated into the loss of more than $1.3 million in contracts, he said.

"Such a hands-off approach speaks to a company's integrity," Falewitch said. "If they don't care about breaking laws, then they don't care about their customers' and employees' safety."

The second part of the bill requires employers bidding on government contracts to submit an affidavit that all sub-contractors and employees working on the contract have completed a federal I-9 form and that they have no reasonable basis to believe that any such person is an illegal immigrant.

"The same fiscal issues apply here," Steele said. "A company that hires undocumented workers avoids the responsibility of paying the same federal and state labor expenses that an honest company pays."

Contractors who provide false affidavits under this provision are subject to perjury and shall not be permitted to contract with the state or any political subdivision for five years.

Those who violate the subcontractor classification will be held accountable with fines based on the difference in income paid to the misclassified worker or workers and the prevailing rate for properly classified employees as well as any taxes due on the income earned, lost income and attorney's fees.

"These companies prosper because they propagate a culture of cheating," Steele said. "This has the potential of ruining the industry."