Underground Construction Economy Task Force Meets

The legislative task force on the underground construction economy held its third meeting of the year last week. The task force was created in the budget by the legislature this year to look at construction contractors and subcontractors that do not register with state and federal agencies and likely are working on a cash basis.

One key issue discussed is the determination if a person is an independent contractor, responsible for his or her own taxes and registrations, or is actually acting as an employee of company running the job.

The state departments of Employment Security and Revenue testified about their enforcement divisions and activities. They discussed their audit capabilities and activities and enforcement authorities.

Another issued highlighted at the hearing were contractors who fail to register with the Department of Labor & Industries or other agencies. Most often found in the residential construction sectors, these contractors generally work on a cash accounting basis and are difficult to track down by the state.

Preliminary recommendations centered on the following concepts.

  1. Better enforcement of the current law for contractor registration and compliance with other laws.
  2. Greater involvement of local governments in enforcement and education activities.
  3. Statutory definition of independent contractor that can be uniformly enforced by all of the state agencies.
  4. Establishing improved interagency means for data sharing.
  5. Increased industry audits of business in the construction sector.
  6. Require contractors to pass a competency test prior to state registration. The intent is to follow the model by set by California and Oregon to develop a test on the state’s laws governing contractor activities.
  7. Require general contractors provide a list of subcontractors working on a specific project

There was additional discussion on the possibility of contractor licensing through some sort of examination. The contractor community is actively reviewing the issue, but has not yet reached consensus on whether or not to support such a proposal.

The task force is scheduled to meet at least one more time this year. It is to issue recommendations for the legislature to consider when it convenes in January 2008.