Colliding independent contractor rules go under the House microscope

Bill sponsors: Employment Security, Labor definitions can snag business owners

Should a company that follows one state agency’s definition of independent contractor get out of paying taxes and fines if it fails to follow the definition of another agency?

It’s a situation that House Bill 1349 would address.

The bill is sponsored by Rep. Keith Murphy and Rep. Kelleigh Murphy, both Republicans from Bedford and co-owners of Murphy’s Taproom and the New Hampshire Sports and Social Club in Manchester. Both testified Tuesday before the House Labor Committee.

The two said they followed the test for designating independent contractors as laid out by the state Department of Labor under workers’ compensation and wage and hour laws, but said they were informed during an inspection conducted by the Department of Employment Security that they failed the test when it came to unemployment compensation law.

They ended up paying not only back taxes on the newly defined employees, but penalties and interest.

“You met their test but not our test,” the DES inspector told them politely and firmly, according to Keith Murphy, who added, “I don’t care which definition is better. Just pick one.”

Not so simple, testified officials from both Labor and Employment Security. “Independent contractor” is mentioned numerous times in the law – most commonly with those two agencies and the Department of Revenue Administration – but also under obscure statutes, such as one that governs animal breeding, explained Marty Jenkins, the Labor Department’s attorney.

While it would seem to be less confusing if at least the two departments came up with a single definition, they have been trying to do that for more than a decade, said Joseph Donahue of the Carpenters Local 118, who said that this would just set up additional loopholes for contractors to evade the law, which he said is a practice that is costing the state tens of millions of dollars.

Several members of the labor committee, however, said they were interested in amending the bill so that it would at least let the employer get out of penalties and interest, if not the taxes themselves.