The state is making progress to eliminate worker misclassification in Maine.

That was the message delivered by Maine State Building and Construction Trades Council President John Napolitano, who spoke at the Southern Maine Labor Council’s annual Labor Day breakfast Monday at the Maine Irish Heritage Center in Portland.

Worker misclassification occurs when employers falsely classify workers as independent contractors to avoid payroll taxes and mandated benefits. It is estimated that at least one in seven Maine construction companies engages in the practice.

Researchers at Harvard University’s Construction Policy Research Center have said the practice puts law-abiding employers at a competitive disadvantage.

Maine Labor Commissioner Laura Fortman said the state’s year-old Worker Misclassification Task Force has launched a three-pronged strategy to combat the problem. It is estimated to cost the state between $2.6 million and $4.3 million in uncollected income taxes each year.

The Maine Department of Labor concluded misclassification occurred in 29 percent of employers audited in 2004 in all industry types, 39 percent in 2005 among all industry types and 43 percent in 2006 among mostly construction employers.

When misclassified workers are injured at work, they may end up in the emergency room at taxpayers’ expense, Napolitano said.

“Since they put the task force together, we have seen departments working together,” he said.

Napolitano said a new law passed last spring will also help reduce the problem. The law authorizes a “stop-work order” on a job site where worker misclassification is found.

Fortman said the task force has worked to help state agencies understand their enforcement authority and coordinate their activities.

She said the task force has met across the state with tax preparers, accountants and various business groups and organizations representing workers to alert them to the problems.

The state has also created a website – www.maine.gov/labor/misclass/index.shtml – that offers information about the law and allows people to submit tips about possible violations.

“We can share those tips across state agencies so the appropriate agencies can conduct investigations,” Fortman said.

 

Staff Writer Beth Quimby can be contacted at 791-6363 or at: [email protected]