Governor Bill Walker is sponsoring legislation he said would make it easier to determine if someone is an employee or an independent contractor.
Walker’s legislation creates a new definition for independent contractors that would determine whether employers have to pay to insure against on-the-job injuries. The issue is particularly important to trade unions that supported Walker in the 2014 governor’s race.
Alaska’s Small Business Association said the new definition is too narrow for industries that rely heavily on independent contractors, namely construction. But construction workers, as well as a few employers, testified in favor of the new definition in a March 20 hearing in the House Labor and Commerce Committee.
“I am speaking to you today in support of House Bill 79, specifically the part that pertains to misclassified workers,” Charlie Young said. ”I’ve been working in the painting and drywall finishing trade my entire adult life, and have never seen the abuse of this so high”
For the most part, those who testified said the same thing: some employers purposely mis-classify workers to lower their cost of labor and gain an unfair competitive advantage in the bidding process.
“More and more, these cheating contractors are winning the bids on projects, as I watch the amount of work for me get less and less,” Young told legislators.
Paul Grossi, a lobbyist for the Alaska Pipe Trades Union, said workers don’t often think about misclassification until after-the-fact.
“I can tell you this: These independent contractors, once they have this injury and they have $200,000 worth of medical bills, they seldom think of themselves as independent contractors,” Grossi said. “So they go to the Worker’s Compensation Board…”
Rhonda Gerharz is the chief investigator for the Division of Worker’s Compensation Special Investigations Unit. When employers fail to pay workers compensation insurance, whether it’s missing a payment or misclassifying workers, it’s her job to fix it.
“There are some who are very well versed and are deliberately trying to save money and trying to underbid their competitors,” Gerharz explained. “And there are others who are just not, perhaps not savvy business people and they think that they can just call someone an independent contractor and issue them a 1099… and that’s not how it works.”
Gerharz said a lot of her cases come from the construction industry, but the issue is ubiquitous.
“We have to educate people all the time that the state of Alaska actually determines employee status by a very difficult and confusing test,” Gerharz said.
That’s where this new definition would come into play. Gerharz said it would not change the number of workers who qualify for worker’s compensation. Rather, it would make it very clear to both employers and workers who is an independent contractor and who is not.
After pushback from the small business association, broader language was adopted, but it hasn’t satisfied the group. Their concern is that it would raise the cost of business and that this new definition would eventually come into play for other benefits such as unemployment insurance and minimum wage.
Grossi said he hopes that will be the case.
“If this passes, then it’ll give a blueprint for … so that they have similar elements,” Grossi said, referring to other employee benefits that his union would like to see more workers get. “But you gotta start somewhere, and this is the biggest problem.”
Grossi’s not sure if Walker’s bills will pass. He’s been working on this issue for more than 20 years, and it’s never been successful.
The session is scheduled to end on April 16, but this issue has triggered special sessions in the past.