The Utah Legislature's Business and Labor Interim Committee on Wednesday began delving into ways to handle what many believe is a growing problem - unethical contractors who pay their workers under the table or misclassify them as freelancers so they don't have to pay expenses such as workers compensation insurance and payroll and unemployment taxes.

"This has been going on for a long time," said state Sen. Ed Mayne, D-West Valley City. "If we keep doing nothing, what we are saying is that we condone the 10, 15 or 20 percent of the industry that sets out to deliberately violate the law."

There are laws already in place to address the problem, Mayne said, estimating that the companies violating such regulations are costing the state millions of dollars every year. The issue is those regulations aren't being enforced because of a lack of resources available to the Utah Attorney General's Office and other state agencies that would be in a position to investigate and catch the offenders.

Brandt Goble, field representative for Local 77 of the International Union of Painters and Allied Trades in West Valley City, told committee members that dealing with the problem probably will come down to enforcement.

"Right now those companies violating the law are operating with impunity. They know those regulating them don't have the resources to go after them," said Goble, who was instrumental in bringing the issue before the committee.

When workers get classified as independent contractors, the companies that hire them aren't responsible for withholding state or federal taxes. Rather, the workers become obligated to see that their taxes are paid. Often, they leave their taxes unpaid, which can give them access to additional cash but leave them without protections such as unemployment benefits for the insurance that covers them for on-the-job injuries.

Also, some companies pay under the table as a way of saving money on the jobs they bid, while at the same time exploiting undocumented immigrants, who often have no choice but to work off the books.

Although the committee focused on problems centered in the construction trades, misclassified workers can be found throughout the economy, in industries ranging from movie production to residential mortgage lending, said Bill Starks, director of unemployment insurance at the Utah Department of Workforce Services.

Starks said that last year 500,000 Utahns received 1099s - the tax form that is given to freelancers and independent contractors by the businesses that hire them. Of that number, 200,000 received 1099s from a single employer, rather than multiple businesses.

"You have to wonder when you hear a number like that whether those [200,000] who work for just one company are really independent contractors or whether they actually fit the legal definition of an employee," said William Hayden, business manager for Painters Local 77.

Mayne said he would like to see greater cooperation and information sharing among state agencies such as the Tax Commission, the Utah Labor Commission and the Division of Occupational and Professional Licensing. They have the capability of investigating companies that violate the law.

Mayne indicated he would support increasing state appropriations to help fund new investigators in the Utah Attorney General's Office. He would want them to make going after the offending companies a priority. "We've heard from the attorney general that it would pay for itself."

steve@sltrib.com

What's next

* The committee asked Brad Stevens, chairman of the state's Construction Services Commission, to meet with contractors and return with feedback at the panel's November meeting regarding steps to address the problem.