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FOR IMMEDIATE RELEASE |
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State
Rep. Bryan Lentz |
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House Labor Relations Committee holds hearing on Lentz legislation
Bill would target unfair employer practices used to avoid paying taxes
FOLSOM, April 23 – The House Labor Relations Committee conducted a hearing today on legislation that would crack down on employers who misclassify their workers to avoid paying state and federal taxes and workers’ compensation premiums.
The bill’s prime sponsor, state Rep. Bryan R. Lentz, D-Delaware, said the intentional misclassification of workers as independent contractors has been on the rise in recent years, particularly in the construction and motor carrier industries.
"Not only are they not paying their fair share of taxes, but these employers avoid paying workers’ compensation, unemployment insurance, overtime and other benefits to employees in order to reduce company operating costs," Lentz said. "Why should honest and legitimate employers be put on an unlevel playing field simply because someone else isn’t paying their taxes? The practice is wrong and is driving down wages and living standards for Pennsylvania workers."
Lentz’s bill (H.B. 2400) would establish the Workers’ Compensation Independent Contractor Act. It would consider a person who performs services in the construction or commercial carrier industries to be an employee of the party that pays their wages unless it is shown to the satisfaction of the Department of Labor and Industry that the individual has been and will continue to be free from direction and control of the employer under his/her contract of service; the service is outside the usual course of the business of the employer; and the individual is customarily engaged in an independently established trade, occupation, profession or business.
Lentz said when you add up the costs, the practice
is severely undercutting the working class, legitimate employers and state and
local governments.
A Harvard University study estimates that Massachusetts is losing roughly $12.6 million to $25 million a year in unemployment insurance premiums and nearly $91 million to $152 million in income taxes through the misclassification of employees as independent contractors. A recent Cornell University study determined that New York state is losing up to $176 million a year just in unemployment insurance premiums due to the practice.
"Misclassifying employees results in a loss of revenue by local, state and federal governments that forces honest employers to pay a heavier tax burden to offset the revenues losses," Lentz said. "That also means less money for our school systems, roads and many other services that the rest of us pay for. Worse yet, many of these same employers undermine the system by hiring and using illegal workers on projects, thereby keeping costs very low and putting legitimate workers at a disadvantage."
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