by Maureen Cregan Connolly, Home Builders and Remodelers Association The Small Business Administration (SBA) regulations indicate that 96.3% of businesses in Vermont are classified as small businesses. According to the SBA more than 75% of Vermont businesses have no employees, and the majority of the remaining employers have fewer than 20 employees. The practice of contracting services as needed is the framework that allows these businesses to shrink and grow in response to economic conditions. Contracting with other small businesses allows for flexibility and keeps them nimble to client need and accommodates economic fluctuations. It’s just the way the Vermont economy has worked—and until recently Vermont has been relatively small-business friendly.
Recently the Vermont Department of Labor has conducted retroactive audits, fining and penalizing businesses for this commonly held practice. Business owners are now being held responsible for Workers Compensation and Unemployment Insurance for contractors they 1099 and that have legally waived workers compensation insurance with permission of the Vermont Department of Labor. In essence the State is saying that contractors (1099 employees) are now seen as employees or dependents of the contract holder regardless if they are a legally organized business in the State of VT that files and pays taxes on their 1099 earnings.
The Vermont Department of Labor is redefining through regulation rather than legislation what classifies a self-employed individual or independent contractor by a 'misinterpretation' of regulations. Claiming these businesses are 'misclassified employees’ and utilizing punitive retroactive audits, fines and penalties to force the reclassification issue. Contract holders are now liable for obtaining workman’s compensation and unemployment insurance for self employed individuals, regardless of their corporate status or whether the individual is able to access the benefits provided
HBRANV supports a bill pending in the legislature H331 that proposes the following language be struck from Title 21: Labor Chapter 009: Employer's Liability And Workers' Compensation§ 601. Definitions: “The individual performs work that is distinct and separate from that of the person whom the individual contracts.” This is the basis of the retroactive audits being conducted by the Vermont's State Department of Labor.
The Home Builders and Remodelers Associations of Northern and Southern Vermont (HBRANV & HBRASV) is calling upon the Vermont State Legislature to stop the Vermont Department of Labor's anti-business practices.
"The Vermont State Legislature cannot afford to remain silent and ignore the drastic impact the aggressive and often totalitarian actions the Department of Labor's auditors have undertaken; forcing contractors to potentially shut down projects, lay off experienced staff, pay exorbitant expenses in the defense of their companies practices during a time when the economy is barely recovering from the extended recession," said Maureen Cregan Connolly, Executive Director of HBRANV. "Even during the most debilitating recession experienced by the housing industry in recent years, these audits in some cases caused small companies to lay off actual employees in order to pay workers compensation and unemployment on independent contractors, fines and/or costs associated with audits and further driving up the cost of maintaining or building a home in Vermont. Lawmakers need to recognize what they seem to have forgotten: that the State's budget woes will not be set aside if they close down businesses that were generations in the making. In times of economic hardship, small business needs to be able to shrink and grow with the ever-changing economic climate. These audits are not directed at stopping the fly-by-night contractors the State claims to be at the heart of the DOL concern; rather they are targeting established businesses that have followed the historically accepted definition of what constitutes an Independent Contractor and are taxpaying law abiding citizens in the State of Vermont."
About the Home Builders and Remodelers Association: The Home Builders and Remodelers Association of Northern Vermont is a Williston, Vermont based trade association established in 1957 dedicated to promoting, enhancing and maintaining a positive business and economic environment conducive to the construction of new housing and renovation of existing housing. HBRABV iscommitted to providing for the housing needs of all Vermonters and to creating competitive advantages for its members. For more information visit: http://www.homebuildersvt.com.