Over the weekend, the Hartford Business Journal published a revealing look at Connecticut’s efforts to crackdown on companies that avoid paying employee taxes and workers’ compensation insurance. Indeed, according to the published report, the state’s efforts resulted in 220 stop-work orders at construction sites across Connecticut.
But the report goes on to contend that "a October 2007 law that gave the state labor department authority to shut down work sites serves as little deterrent to companies intent on illegally keeping costs down."
The underlying issue is that some employers classify various workers as "independent contractors", meaning that taxes are not withheld. Once the employees are properly classified, the employer has to pay those taxes. (Some also need to carry workers compensation insurance as well.) Over 200 companies have not, and have been the subject of various investigations by the Connecticut Department of Labor.
The law that the article focuses on, namely, is Public Act 07-89, arising from then Senate Bill 931.
You can examine the legislative history of the bill here. That Act amended some of the state laws to allow the Department of Labor to issue certain types of stop-work orders and allow the Department to increase the fines for violations after conducting investigations.
The HBJ report contends that the law has not been as effective as it could be because "Connecticut’s enforcement efforts are hindered by a lack of staffing and no provisions in the law for barring repeat offenders from getting private work."
For employers, particularly those in the construction industry, the article is a stark reminder of the importance of following the guidelines regarding classification of workers and paying employee taxes.
(Photo courtesy of: Morguefile.com)