As head of a carpenters union, it infuriated Glenn Marshall that his members lost out on jobs to companies that cut costs by improperly classifying their workers as independent contractors, avoiding payroll taxes and other expenses.
“I could barely buy the materials for what they would bid a project,” Marshall recalled.
But now he is in charge of the State Department of Labor and he has the authority to crack down on those employers who misclassify their workers or pay them under the table — and he intends to use that power.
“We are learning how to detect this better,” Marshall said in an interview. “There is more awareness on our part,” Marshall said.
By the end of the fiscal year, Marshall said he expects the DOL to issue almost 200 stop-work against empoyers who misclassify workers–an 18 percent increase from the previous year.
Last year, Marshall teamed up with then-Attorney General Richard Blumenthal to argue for higher fines on employers that wrongly classify workers as independent contractors. That increased penalty, to $300 a day, is expected to more than triple the amount of revenue the department collects from the fines. A report released by Marshall and Blumenthal last year found 1,200 employees were misclassified during the previous two years.
In addition to the penalties, an influx of additional money to the state’s general fund is expected from back taxes owed for these employees. During fiscal 2009, $1.2 million was collected by the Department of Revenue Services.
Marshall said the sour economy has provided an incentive for some employers to cheat.
“People are looking for an edge,” he said.
The extent of the problem is not clear. A study commissioned by the U.S. Department of Labor from 2000 found of the companies they looked at in nine states, up to 30 percent of the firms were in violation.
Blumenthal, now a U.S. Senator, is taking his experience of reforming misclassification laws in Connecticut to the federal level. He has co-sponsored legislation that would provide many more employees with overtime and minimum wage benefits and workers’ compensation.
“This problem really needs and deserves a national fix,” Blumenthal said during an interview. He said even though Connecticut has been much more aggressivein recent years, a national crackdown on misclassification is “long overdue.”
“This would help Connecticut by leveling the playing field with other states,” he said.
While Marshall says the state DOL is “not on a witch hunt”, Blumenthal said the state does rely too heavily on tips from employees before they can investigate and also is in need of additional staff to investigate.
The number of inspectors has remained constant at 27 over the last several years.