Committee split on workers’ bill

AUGUSTA – A bill intended to make it easier for workers in Maine to classify themselves as independent contractors will be forwarded to the Legislature without a recommendation on whether it should be adopted as law.

The Legislature’s joint committee on labor split 5-5 Thursday when it voted during a work session on whether LD 1847 ought to pass.

The bill will make the state’s standard for independent contractor status less strict, according to Rep. Janet Mills, D-Farmington, who sponsored the bill. Mills testified in favor of the bill last week, as did the owners of several retail carpeting and flooring businesses who have been told by Maine Department of Labor that they owe thousands of dollars in unemployment tax payments to the state. State law requires businesses to pay unemployment taxes on their employees but not on workers who are considered to be self-employed.

Laura Boyett, director of MDOL’s Bureau of Unemployment Compensation, told the committee Thursday that the department does not have an overly rigid interpretation of the issue of control, which helps determine whether a worker is an employee or independent contractor. During last week’s public hearing, some business owners had expressed concern that MDOL was considering some carpet installers to be employees of their stores simply because the retailers tell the installers where the work needs to be done.

“We don’t base the decision just on telling someone where to go or where to report to work,” Boyett said. “We really look at the specifics of an individual case.”

Issues such as who pays for materials and whether the work being done traditionally has been considered outside the scope of the retail business also figure into whether a worker is classified as an employee or independent contractor, she said.

Lloyd Black, tax section manager in the MDOL bureau, told the committee that the department is required by federal law to audit 2 percent of the businesses in the state each year. Of those audited businesses, 90 percent can be targeted or picked intentionally by the department while 10 percent need to be selected at random, he said.

Auditors are careful not just to assess tax payments on businesses in industries that seem to have high levels of misclassification, Black said.

“They are trained not to have preconceived notions when they go out there,” he said. “We have finally hit an industry that does have this type of issue in it.”

Boyett said the department decided to audit businesses in the building trades because of an independent study done last year that indicated Maine’s construction industry has a high level of worker misclassification.

Boyett also cautioned against creating an official definition for what kind of work constitutes self-employment or independent contractor status. Often the workers in question have arrangements with more than one business, she said, and depending on the variable of those arrangements they could qualify as an employee of one business and as an independent contractor with another.

Most members of the legislative committee seemed to agree that simply to change slightly the wording of the statute, as Mills’ bill would do, may not properly address the issue.

Rep. Darren Hall, R-Holden, said that there needs to be an easier way for businesses to determine whether a worker is an employee or an independent contractor before any work is done.

“We need to make this simpler,” Hall said. “We need to get in front of this and make sure people are classified correctly at the beginning.”

Rep. Herbert Clark, D-Millinocket, suggested that the panel recommend that the bill should not pass, but other committee members said they should recommend that a task force be established to study the issue further.

The Legislature will consider the committee’s split recommendation when the bill comes up for a vote on whether it should become law.