by Nancy Hicks
The growing practice of calling employees independent contractors seems simple and harmless.
But in practice the misclassification hurts honest companies that can't compete with lower bids, and it robs the state of tax dollars, said Omaha Sen. Steve Lathrop, sponsor of a bill that would penalize construction and delivery service companies for misclassifying workers.
When workers are labeled independent contractors, the company does not withhold income taxes, doesn't paying unemployment taxes and doesn't pay overtime.
By avoiding its responsibility to the workers, the company saves about 30 percent of its labor costs, Lathrop said.
"This is about leveling the playing field so that the honest contractor can compete," he said about the measure (LB563), which received 38-0 first-round approval Thursday.
The bill is, in part, aimed at illegal immigrant workers.
Many of the people employed as "contract workers" in the construction industry are undocumented workers. So cracking down on the practice will mean contractors will be more likely to hire U.S. citizens and legal immigrants, Lathrop said.
In addition, the bill requires construction companies doing work for a local or state government to provide assurances they are not hiring illegal immigrants and have federal immigration forms on file.
Cracking down on employers is important in reducing illegal immigration, several senators said.
The root cause of the country's immigration problems is employers who want to pay substandard wages, Omaha Sen. Tom White said.
Meatpackers, White said, are among the worst offenders, hiring illegal immigrants and dumping social costs onto communities.
A number of senators talked about what White called the "corrosive effect" of illegal immigration and the federal government's refusal to do anything about it.
The federal government "ties state's hands, leaves us to pick up the pieces and refuses to take any constructive action," said Sen. Annette Dubas of Fullerton.
But the bill will be a futile gesture if the state Department of Labor doesn't have the staff to investigate, Dubas said.
The bill uses the state's unemployment law definition for contract worker. It provides for civil penalties: $500 per worker for the first time a company is caught using contract workers illegally and $5,000 per worker for later offenses.
Companies using undocumented workers on public projects would be banned from public construction projects for three years, under the bill.
The measure would require the Nebraska Department of Labor to have a hotline and Web site where people could report suspected abuse.