Contractors speak up on workers comp

Mario Plante owns a contracting company in Hudson, but he turns to Massachusetts for most of his business.

It’s nearly impossible to land a job in New Hampshire because too many of his competitors avoid paying workers compensation insurance by illegally classifying their employees as independent contractors, Plante said. That cuts their costs by about 30 percent, making it easier to come in low on every project bid, he said.

Plante is part of a growing group of contractors speaking up about a problem they say is widespread in New Hampshire. Last week, he was one of several to share his concerns with U.S. Rep. Paul Hodes at a meeting in Nashua.

Meanwhile, a joint task force between five state agencies is preparing to investigate contractors throughout the state and penalize those who are improperly classifying their workers.

A revised state law that went into effect this year increased the maximum fine to $2,500 with an extra $100 penalty per employee for each day of the violation, dating back to the first of the year.

“If you’re talking 80 people on a construction site, that could easily reach over a million dollars,” state Department of Labor Commissioner George Copadis said.State law makes 12 distinctions between an employee and independent contractor, but the basic difference is that independent contractors are business owners and should be allowed to come and go at will.

Independent contractors are typically paid more per hour than employees, but they’re cheaper to employ because they don’t have to be covered under expensive workers compensation policies.

Contractors like Plante say too many companies in the construction field are hiring employees who are told what to do and when, but dishonestly classifying them as independent contractors to save money.

The issue caught public attention earlier this year when the labor department ruled in favor of a Nashua man named Celso Mena, who claimed the subcontractor who hired him to help build a school in Hinsdale should have classified him as an employee.

Mena, a Panama native who spoke to Hodes at last Tuesday’s meeting through a translator, fell on the job site in July of last year shattering the bones in his left foot. He initially could not collect workers compensation money because of his independent contractor status.

In April of this year, the labor department ordered that he be paid 60 percent of his salary until he recovers, as well as back pay, because his job description met the criteria of an employee – he had an on-site supervisor and was required to report and leave at certain times each day.

Plante, president of Save-On-Wall Co., which specializes in wall and ceiling work, said he sometimes employs as many as 500 people and carries the proper insurance for all of them. But that almost guarantees that he’s out-bid for work, he said.

“It makes it real hard to compete legally,” Plante said.

Scott Richards of Spectrum Floors in Manchester admitted that he was contributing to the problem until he made the decision to unionize his employees.

“I was honestly part of the problem for years,” Richards said. “When you live in this jungle, you have to survive in this jungle.”

Richards said he is lucky that his company has been around for a long time and has earned enough trust to do repeat business. But it has become more difficult to compete in this market since the switch, he said.

The state task force, which has yet to meet formally, includes lawmakers, labor union representatives, business owners and insurance companies. It also includes a representative from the state labor department, Department of Employment Security, Insurance Department, Department of Justice and Department of Revenue Administration.

Insurance fraud attorney Catherine Tucker, who works jointly between the justice and insurance departments, said state law allows for criminal charges in certain cases of employee misclassification. However, she declined to say whether she expects any charges to result from the task force investigation.

Copadis, the labor department commissioner, said the agencies plan to conduct joint inspections of construction companies that will include checking their books and interviewing employees.

The group will form a mission statement this week and start a Web site, he said.

“I think it’s been happening more often that not,” Copadis said of employee misclassification. “You want a level playing field for everyone. You don’t want anyone circumventing the law.”