Employing off the books; the art of getting around workers’ comp

August 17, 2011 —

Contractor Patrick Murtagh estimates that there are hundreds of construction employees who work off the books every season in Sullivan County.

Murtagh paid a visit to the Sullivan County Legislature on August 4, and listed various reasons that employment laws should be enforced. Murtagh, who has three year-round employees, pays their workers’ compensation, half of their social security, Medicare, unemployment insurance and New York State Disability Insurance. His employees pay federal and state taxes, social security and Medicare.

Contractors who don’t pay these various state and federal costs can charge lower rates for work, and make it hard for the contractors who do work by the rules to survive.

There was a suggestion that the county could set up a registry where contractors who provide proof that they carry all the necessary coverage could be included, thus the public would know which contractors are abiding by NYS employment rules.

Legislator Alan Sorensen said he thought the idea of a countywide registry was a good one. He said, “If there are that many people not paying into the system, it’s that much more of a burden on the rest of us.”

County chairman Jonathan Rouis, however, said that perhaps the Sullivan County Chamber of Commerce or some other business group would better handle a registry. He said, “The issue for the county is manpower.”

A group of contractors was formed three years ago to examine the issue. Because of numerous consumer complaints about unscrupulous contractors, then district attorney Steve Lungen called for the licensing of all contractors in Sullivan County. The chamber responded by setting up a Contractors Initiative Board (CIB) made up of 23 contractors, including electricians, plumbers and builders, and including such well-known companies as Mountain Construction, Werlau Construction and Catskill Farms.

Murtagh’s position is that enforcement of the state laws should begin with the code enforcement officers (CEO) or building inspectors of the various towns and villages in the county, because for most construction work, such as new buildings or expansions or decks, a permit is required. By state law, permits are not supposed to be issued unless the contractor supplies either a workers’ compensation certificate, a letter of exemption or documents showing the work is being done by the homeowner.

Murtagh told the lawmakers that according to the results of Freedom of Information Law requests in a couple of municipalities, 66% of permits were issued without any of the three types of documentation. And among contractors who do supply documents, according to various sources, the letters of exemption—which are intended to go only to people working alone, with no employees and no subcontractors—are being widely abused. There are reportedly many instances of people using letters of exemption to get permits to build a house and, as a general rule, no one today builds a house all by himself or herself.

In exchanges with the CIB, code enforcement officers said that they did not have the time or the resources to enforce the various state laws. Neil Gilberg, who was formerly the Sullivan County Clerk and who is now a business advocate with the NYS Workers’ Compensation Board, created a pilot program whereby if a CEO suspects that a contractor is operating without workers’ compensation, the CEO can call or email officials in Albany or Binghamton, who will respond by sending someone to investigate, or perhaps by getting a local law enforcement official to investigate.

However, not everyone agrees that the CEOs should be put in a position of having to enforce the law. Suggesting that CEOs should be reluctant to issue permits based on exemption letters by contractors who claim to have no employees is reasonable, said Catskill Farms builder Charles Petersheim, but, he added, “giving them police powers? It just seems really hard to believe that it could work.”

According to various sources, the prevailing view among CEOs is that enforcing the relevant state laws is not their responsibility.

For homeowners, there is a question of compensation. If, for example, an employee without workers’ compensation were to fall off a roof, the employer is responsible for the hospital bills. But, if the employer doesn’t have enough money to cover it, the worker may go after the homeowner.

Residents can determine whether a contractor is covered by workers’ compensation by going to www.wcb.state.ny.us and clicking on Insurance Carriers, and then clicking on “Does Employer Have Coverage,” and following the prompts.

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