Jobless benefits elusive Self-employed affected

AUGUSTA – Changes in laws and the structure of the economy since the last recession a decade ago now mean that fewer workers can rely on the unemployment insurance system to help them get through rough times. Analysts say that could affect the state’s ability to ride out the current economic storm.

“In Maine, nearly 10 percent of the work force is self-employed and they are not covered,” said University of Southern Maine economics professor Charles Colgan. “And the nature of the work force has changed greatly. Far more people are working part time and effectively are not covered by unemployment.”

About 660,000 Mainers are working, but more than a third are working part time. And while most part-time workers technically are covered, current law will allow part-time workers to receive benefits only if they are willing to take full-time work.

“Employers pay unemployment taxes on the first $12,000 of pay regardless of whether a worker is full- or part-time,” said Laura Boyett, director of the Unemployment Compensation Bureau, “so those workers are eligible for benefits. But, they must be looking for a full-time job, not a part-time job, to collect those benefits.”

That eligibility rule would change under a measure kept alive by a 6-5 vote of the Legislature’s Labor Committee on Friday. Voting along party lines, Democrats on the panel opted to consider a bill this winter that would provide benefits to part-time workers laid off and unable to find either a full-time or part-time job.

“Given what is happening in our economy, we should at least keep this measure alive for consideration in January,” said Rep. Zach Matthews, D-Winslow, sponsor of the measure.

Sen. Beth Edmonds, D-Freeport, said with proposals under consideration by the U.S. Congress to provide extended unemployment benefits to both full-time and part-time workers, the state legislation should be considered by Maine lawmakers.

“This would be paid for by Congress,” she said. “It seems to me we should keep this measure before us so we can be in the position to take advantage of the federal bill, if it is part of the stimulus package.”

The GOP members at the meeting disagreed. Rep. Russell Treadwell, R-Carmel, said he had opposed the legislation last spring and continues to oppose the expansion of unemployment coverage. He pointed out that part-time workers could receive benefits if they are willing to look for a full-time job. Sen. Karl Turner, R-Cumberland, agreed and warned that changing the law just to take advantage of the federal funding now could hurt employers down the road.

“When you make the change, the change goes on forever,” he said. “I am opposed to that.”

Peter Gore of the Maine State Chamber of Commerce said the GOP lawmakers were right to oppose the extension of benefits to part-time workers, even if at first the federal government picked up the tab.

“What happens in 12 or 18 months when the federal money runs out?” he asked. “Then it will be employers through the tax on employers payroll that will pay for this.”

But, Ed Gorham, president of the Maine AFL-CIO, said he hopes the full Legislature will support the measure. He said he was surprised at Republicans on the panel trying to block consideration of the measure.

“This is not a partisan issue, and should not be a partisan issue. The first bill to [propose] this was introduced by then Senate President Jeff Butland and he was a Republican,” he said. “Sometimes it is just hard to fathom human nature.”

Gorham said studies indicate that more and more Mainers are choosing to work part time, or are forced to take two or more part-time jobs to support their families. He said the unemployment insurance program should be “brought into the 21st century” by changing the unemployment system to reflect the changes in the work force.

“We need to update this system that was created under [President] Franklin Roosevelt during the Depression,” said Chris Hastedt of the Maine Equal Justice Project, an Augusta-based group that advocates for people with low incomes. “Today, six out of 10 Maine workers do not receive unemployment benefits when they become unemployed. If that worker happens to be a low-income woman, the odds are only 1 in 10 that she will qualify for benefits.”

Hastedt said the whole Maine economy would suffer if Congress voted to provide benefits to part-time workers and Maine law continued to ban that coverage. She said such a program would provide millions of dollars to help families meet their obligations, and that would help the entire state economy.

“Unemployment provides cash to keep workers paying their bills,” Colgan said,” and that has a broad impact on the state.”

Colgan said there also are fewer workers covered by the current unemployment system because of the way several business enterprises are established. He said many new companies are not companies at all, at least in the traditional sense.

“For example, four or five computer programmers get together to develop programs,” he said. “They may call themselves a company, but they set it up so they are all independent contractors.”

Instead of hiring support staff, such as a secretary, they contract with an individual or individuals for those services. As a result, he said, they do not have a traditional company and do not pay unemployment taxes.

“This is a big change from 10 or 15 years ago,” he said.

But Boyett of the Unemployment Compensation Bureau argues that some of those business structures set up to avoid business taxes may be liable for them anyway. She said that every year several business enterprises that thought they were exempt from unemployment taxes because the Internal Revenue Service said they were independent contractors got an unpleasant surprise.

“We audit companies for compliance independent to other tax issues,” she said. “We have had a number of cases where people were independent contractors but we found there was an employment relationship that meant they owed us the tax.”

Boyett said that often such audits occur when people file for unemployment and their job history is researched. She said if it is determined there was an employment relationship under state law, the employer is assessed back taxes and the worker gets his or her benefits.

Other provisions of Maine law contribute to limiting who is covered by unemployment. For example, Maine is one of only 11 states where seasonal workers are prevented from using wages earned in that employment to qualify for benefits in the off-season.

Congressional leaders are still considering various economic stimulus ideas, so it is still not known whether extended or expanded unemployment benefits will be included. Regardless of what Congress does, state lawmakers will consider the proposal to expand coverage to part-time workers when they return to Augusta next month.