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StumbleLawmakers targeting businesses ducking employee taxes
Friday, June 11, 2010 | 2:05 a.m.
CARSON CITY — In these tough economic times, some employers have found a way to cut expenses by avoiding the business tax and not contributing to the fund that finances benefits to the unemployed.
The businesses are improperly classifying some workers as independent contractors and skipping the tax and the state assessments.
A legislative subcommittee has voted to recommend imposing hefty fines on employers that misclassify their workers.
Assemblywoman Bonnie Parnell, D-Carson City, said the practice is widespread and the state is losing a lot of revenue.
Jack Mallory, director of government affairs of the painters union in Las Vegas, said legitimate contractors are pushed out of the market because they cannot compete with those who break the law.
He said these contractors reduce their labor costs by as much as 30 percent by not paying various employment-related taxes or providing workers compensation insurance.
“This does not foster fair competition,” he told the Subcommittee to Study Employee Misclassification.
As a recommendation to be forwarded to the 2011 Legislature, the subcommittee agreed the employer should be fined for the first offense at $5,000 for each employee who is misclassified as an independent contractor.
A fine of $15,000 for each employee misclassified would be imposed for a second offense. And the fine for a third offense would be $25,000 and loss of their business license for three years.
The state imposes a tax on businesses based on payroll. By having employees classified as independent contractors, that tax is lowered. And the business would not have to pay into the unemployment trust fund or the account for coverage for workers injured on the job.
The subcommittee accepted the suggestion of member Yindra Dixon to give employees who are misclassified the right to file suit to collect money they were due but did not receive.
Labor representatives have testified that some employees who were misclassified were not paid minimum wage.
Dixon, of Las Vegas, said an employee who filed a complaint with a state agency would have to wait 120 days before filing suit. That would give the agency time to process the claim. If there was no decision, the worker could carry the case to court.
The subcommittee, headed by Sen. Shirley Breeden, D-Henderson, also is recommending to the 2011 Legislature that state labor law posters including definitions of employees and independent contractors be placed in areas where work is perform or employees congregate.
The subcommittee also wanted to ensure that audits are being made of employers to see if they are properly classifying workers. Subcommittee member Fran Almarez of Las Vegas said that is how other states have found money due in lost taxes or assessments.
Donna Clark, chief of contributions at the state Division of Employment Security, told the subcommittee that it conducts 4,000 random audits of employers a year, and about 12 percent of those are for misclassified workers.
The subcommittee, on the recommendation of Parnell, who is subcommittee vice chairwoman, approved a plan for civil penalties against a person who advises an employer to misclassify workers as independent contractors in an attempt to lower costs.
Discussion: 1 comments so far…
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Are these employees citizens or illegal immigrants? Answer this question and we may find out why the employer isn't listing them and paying taxes on them.
Seeing that one of the trades in the construction industry is listed for foul play, I've got a good idea for my answer. Anyone else? Does anyone think ICE should be called in?
I completely agree....There's more to this story.
They need to check on the Legends Restaurant and Lounge in Stoystown Pa. The owners pay the employees under the table if they get paid at all! They move from one place to another just ahead of the taxman! Lock them up and throw away the key! Just a suggestion!
I think ICE should be called at 1-866-DHS2ICE (347-2423)and have them check it out.
If everything is on the up & up, then they can go on to the next place.
If someone lives in Nevada and knows some of the business names, perhaps they could make the call.
Hopefully not everyone is to busy working and paying their taxes (and the taxes of those who aren't paying) to take 30 minutes to make a few calls.
"This does not foster fair competition," he told the Subcommittee to Study Employee Misclassification.
This statement pretty much sums it up. Businesses are overtaxed. There is a maximum amount of taxation that people will tolerate. We've reached or exceeded that point. If I was a business owner in this tax environment I'd be considering this option also. Government intervention in the form of taxes has skewed the competitive model to such an extent it is unworkable. Either we have to go "all in" on socialism or give up. I'm not advocating the all in strategy.
it isn't just the undocumented workers .employers don't care as long as they don,t have to pay . it's about time we get to the real criminals . not only do they cheat our state and local there is no federal withholding . that is why undocumented workers don't pay taxes not because they don't want to pay taxes because they can't
Presume that any telemarketer or anyone in the timeshare industry EXCEPT the girl who types the contract is misclassified. It is COMMON practice in the industry. In addition to classifying timeshare and telemarketing employees incorrectly, they also pay them cash "spiffs" or bonuses, which are not reported. Again, COMMON practice.
It's about time the Lege does something about this. Mis-classifying employees is as bad as hiring undocumented workers.
some of you are obsessed with mexicans, I think there is more to those who are obsessed, maybe u need investigating to check why you have so much hatred for them
"If I was a business owner in this tax environment I'd be considering this option also."
I love this - you'd consider breaking the law to make a political point.
If you were a business owner, I'd hope the state would nail your hide to the wall as an example to all the other business owners who cheat the system.
You want to operate a business in this state? Play by the rules. But don't screw the system, because in the end the system screws you.
This practice goes much deeper than most suspect. It is not about legal or illegal, it is about money. It is so widespread that the public would be amazed if, I say -- IF -- anyone in government would really, I mean --REALLY -- go after those who use this system, dishonest to the community as a whole and the employee as one.
From restaurants to Law offices, from doctors offices to sales departments.
The sneaky, "wily" ones do it this way. They pay a small salary very lawfully including paying all taxes due. Then the bulk of the remuneration is paid as a"bonus"or a "commission" to the employee now an independent contractor, avoiding all social charges for the employer, that the employee has now to pay in full or in part.
Don't ask me how I know ...
"The businesses are improperly classifying some workers as independent contractors and skipping the tax and the state assessments."
Funny thing how no mention is made anywhere about the source of the state's authority, the Nevada Constitution. Compare this and other statements from this article to Article I, Sec: 15: "No . . . law impairing the obligation of contracts shall ever be passed."
bbtbrain -- excellent points
"it's about time we get to the real criminals . not only do they cheat our state and local there is no federal withholding ."
wedo -- seems you, along with the rest of this herd, overlooked the state's blatant disregard of its Constitutional limitations in the name of grabbing $$ and putting honest people out of business.
"I love this - you'd consider breaking the law to make a political point."
DougDemocrat -- that and the rest of your post shows not only incredible ignorance but the herd attitude that is at the root of this whole problem.
One of the absolute fundamentals of a free People is they are free to make and enforce contracts. As Justice Brown put it so well for the U.S. Supremes in 1906's Hale v. Henkel: "The individual may stand upon his constitutional rights as a citizen. He is entitled to carry on his private business in his own way. His power to contract is unlimited. He owes no duty to the State or to his neighbors to divulge his business, or to open his doors to an investigation, so far as it may tend to criminate him. He owes no such duty to the State, since he receives nothing therefrom beyond the protection of his life and property. His rights are such as existed by the law of the land long antecedent to the organization of the State, and can only be taken from him by due process of law, and in accordance with the Constitution."
Hale v. Henkel has to do with witness testimony in antitrust cases, not with the right of the state to levy taxes upon businesses. Justice Brown's reasoning may be sound, but IT DOES NOT APPLY to the matter at hand.
By the way, enforcing contracts between private parties and employment contracts are two fundamentally separated areas of civil law.
DouglasD -- then provide an opposing authority. You're completely wrong on Hale v. Henkel -- it was chiefly about subpoenas of corporate records. You're also wrong about enforcing contracts being "separated areas of civil law." That's a legal fiction even if you can come up with any authorities to back you up.
"Rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others. I do not add 'within the limits of the law' because law is often but the tyrant's will, and always so when it violates the rights of the individual." -- Thomas Jefferson, letter to Isaac H Tiffany (1819)
Taxation is theft - those avoiding such theft are criminals?
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Doug Demo: What would you do when my business is taxed out of existence? Would you nail my hide to the wall then too? So it is ok to tax a business to death because "it doesn't break the law." I wasn't saying I WOULD do that, just that the tax environment is so punitive that it is an option I'd be forced to consider if I wanted to stay in business. I love you tax and spenders. Gimme your money and shut up about it. No complaining...next!!!
Try again Doug.
I'll only support the business audit if they remove all illegal employees. Lets handle both problems at the same time.
bbtrain
The government is taxing and regulating me out of business.
I can't keep up with the war the government is waging against me..The government is punitive and adversarial. If I skip the trade/business news for a few days..I am missing some new jot or tittle in regulations or tax laws..I could spend my days on the telephone asking my Congressman to stop this department or that department from turning the screws..and that is State and Federal.
I am out numbered and the hostiles in Washington are winning the war..
I am looking into government entitlements..It is the only future I foresee for me. Become a "community organizer" and apply for the same bucket of bucks ACORN is sucking up..
"You're also wrong about enforcing contracts being "separated areas of civil law." That's a legal fiction even if you can come up with any authorities to back you up."
Would you like to start with the Restatement (Third) of Employment Law?
Or the principles of contact - that no contract can exist without an exchange of consideration?
That even though it is called an "employment contract" it is not a true contract because the parties are not of equal power, and is more akin to the common law principles of master-servant or subordination?
"Would you like to start with the Restatement (Third) of Employment Law?
"Or the principles of contact - that no contract can exist without an exchange of consideration?"
DougD -- no, I started with the source of law, the Constitutions. Your second bit makes no sense at all. Again, ALL free people have the right to make and enforce their own contracts. Where you get the "master and servant" thing is a mystery -- that's more like indentured servitude.
In order to write contracts with contractors one must have their own business,i.e., contractors license, bond, insurance, etc. One has to be legitimately operating a business, other wise one is employed by that business as an employee and ahould have Taxes, Soc. Sec.,ins, retirement funds taken from his check.
If someone is doing work under a contract agreement, they must have proper business credentials as I have listed above enabling them to operate as a business.
A legal business,i.e.,contractor can't just pay a party under the table unless the recieving party has filled out papers stating that they are responsible for their own taxes, etc. They have got to provide a legal paper trail for government entities to be able to follow.
They should audit the dental office businesses. There are a lot of hygienists told me that their dentists hire them to work but pay them as independent contractor (form 1099)