Boston Business Journal

New task force takes on 'underground economy'

by Chris Auclair
April 11, 2008

Businesses across the state better get their paperwork in order.

Gov. Deval Patrick recently signed an executive order creating the multi-agency Joint Task Force on the Underground Economy and Worker Misclassification, to share information and lead a public campaign to stop businesses from hiring undocumented workers and sidestep rules concerning pay and employee classification.

The DOR predicts the task force's campaign will generate an additional $30 million in tax revenue for the 2009 fiscal year.

Suzanne M. Bump, secretary of Labor and Workforce Development, said this effort is not about generating revenue, but rather preventing businesses from cutting corners.

"This is as much an effort to protect employees from being exploited as it is to create a level playing field for businesses," Bump said.

Mark Ehrlich, executive secretary and treasurer for the New England Regional Council of Carpenters, said enforcing worker-classification laws not only ensures employees get proper benefits, but also prevents companies from underbidding for state projects.

The measure has raised some concerns.

Morris N. Robinson, managing director of Boston-based tax consultancy M. Robinson & Co. PC, has already seen one client affected by the new enforcement initiative. He is worried that the measure might hurt small to midsize businesses -- businesses that could get stuck paying tax penalties or fines worth tens of thousands of dollars.

"It creates traps for the unwary, especially for small businesses that may not have the sophisticated advisers to deal with this," he said.

Joseph B. Darby III, a tax attorney at Greenberg Traurig LLP, said he has reservations about lumping misclassification together with the "underground economy."

Questions linger as to whether legitimate contractors might still be considered employees by the state, he said. For instance, the DOR and the attorney general's office, which is also part of the task force, use different legal standards to determine who qualifies as an employee.

Chris Auclair can be reached at cauclair@bizjournals.com.