Bill draws distinctions between employee, contractor

Lobbyists for New Hampshire trade associations and unions voiced support for a bill March 7 that would distinguish between an independent contractor and an employee. The goal: to crack down on firms that misclassify employees as independent contractors to avoid paying employment taxes and other obligations.

A legislative commission last year found such abuse is common, especially in the construction industry. The group suggested several bills, including Senate Bill 267, which had its hearing March 7.

Its sponsor, Sen. Maggie Hassan, D-Exeter, said it would align the competing definitions of a contractor in several laws and make them all easier to enforce.

“These employees don’t understand the ramifications of having independent contractor status,” she said.

Bill supporters say misidentified subcontractors lose their rightful job benefits and protections under minimum wage, Social Security, unemployment compensation, overtime, workers’ compensation and whistleblower laws. The activity also diminishes revenue from the business enterprise tax on payroll, reduces the taxable income declared by contractors, and cuts the level of FICA payments on behalf of workers, proponents said.

While the bill has no fiscal note, supporters said it would boost income from the BET. It also imposes civil fines up to $2,500 for misclassifying an employee as a contractor. That money would go into the general fund.

At the hearing, Hassan announced a compromise amendment she reached with Senate Majority Leader Bob Clegg, R-Hudson, and other stakeholders. It would increase the number of attributes of true independent contractors from five to 11.

Among other items, to be labeled independent contractors, people must make their own hours, work for themselves to meet deadlines and standards, see themselves as contractors, control their own time, and often work for several employers or clients at once. They also hire their own help, own their own tools, pay their own expenses and succeed or fail by the bottom line.

The bill includes an affidavit form that contractors and their client company could both sign. Such a measure would remove most of the doubt about their business relationship, said Hassan.

“It’s not conclusive evidence at a hearing,” Hassan said, “because an employer could still use the form to exploit someone who needs a job badly.”

Bob Scully of the New Hampshire Motor Transport Association supported the bill, as did Gary Abbott of the Associated General Contractors of New Hampshire, who said it would protect employers from people who sell themselves as contractors and change their minds when they get injured on the job.

Mark Hounsell, a lobbyist for the Building and Construction Trades Council, asked lawmakers to add a statement to the affidavit allowing workers to confirm that they hire out to other firms. He also suggested an employer caught cheating should pay any back benefits, FICA taxes and worker compensation payments.

The legislation would affect a big part of the economy. Two years ago 304,000 residents earned a combined $13 billion in 2004 as contractors, according to the Department of Revenue Administration. Some 211,000 of them made less than $10,000 a year as contractors, but 15,000 took in more than $100,000, the agency said.


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