GOP tax bill strips workers of jobs benefits

by Tim Wheeler

This article was reprinted from the July 26, 1997 issue of the People's Weekly World. For subscription information see below. All rights reserved - may be used with PWW credits.

The U.S. House of Representatives has approved a clause hidden in the $85 billion tax bill that would strip millions of workers of unemployment insurance and other benefits by allowing employers to reclassify their employees as "independent contractors."

The AFL-CIO is heading up a drive to block the measure, sponsored by Rep. Jon Christensen (R-Neb.) and is also fighting the Senate version of the bill.

Peggy Taylor, AFL-CIO legislative director, said the measure is another sign that Republican leadership seeks to "put government on the side of those corporations and employers who want to get away from any responsibilities to the people who work for them."

An AFL-CIO analysis of the measure charges that "misclassification" of workers as independent contractors "has a severe impact on workers' compensation, workplace rights, the federal treasury and the economy ... Classification of employees as independent contractors also effectively repeals their coverage under national employee protection laws" including the minimum wage and 40 hour workweek.

A 1984 IRS survey estimated a $1.6 billion loss to the federal treasury from improper misclassification of workers as "contractors." The solution "is to enforce proper classification, not legalize worker abuse," the AFL-CIO statement concluded.

Big Business is not waiting. Microsoft and Pacific Bell, for example, are terminating workers on their payrolls and hiring thousands of "independent contractors" without health insurance, pensions or unemployment insurance.

An editorial in the Palm Beach Post June 15, headlined, "Stop Bogus Contractors from Fleecing Florida," denounced building contractors who force their workers to file the Internal Revenue Service 1099 form identifying themselves as "independent contractors." The fraud went undetected until the Coalition for Independent Contractor Reform was organized several months ago.

The group meets every two weeks at the Plumbers Union hall and includes members of AFL-CIO building trades unions, the West Palm Beach National Council of Senior Citizens and some building contractors.

On June 3 coalition members at a county commissioners meeting demanded formation of a "strike force" to crack down on the practice.

Tom Mathews, secretary-treasurer of the Palm Beach Laborers Union, warned that the GOP federal ax bill will open the floodgates even wider.

"The snowball has turned into an avalanche," he said.

"What they want to do is make it legal because what they are doing right now is illegal. The level of fraud is unbelievable. Millions of dollars in tax revenues are being lost and they say they want to balance the budget."

Mathews said the door was opened in President Reagan's 1986 revisions to the federal tax code. "It was an open door policy and the door has opened wider and wider ever since," he said. "Florida is a seedbed because state law provides an exemption from workmen's compensation for 'self employed' workers."

The result was a rush to set up private insurance companies to provide "self-insured" workers compensation.

Associated Industries of Florida, controlled by John Shiebel, a well-connected GOP lobbyist in Tallahassee, has mushroomed into a multi-billion dollar private insurer that has IBM, Pratt and Whitney and the Publix grocery store chain among its clients.

"The potential for greed is huge," Mathews said. "It fits in with everything they are trying to do, privatize, break the unions, take away everything the labor movement has gained."

Four of Florida's "self insured" private funds went bankrupt in the past four years. This forced the state to step in with $80 million in bailouts to cover their liabilities and Insurance Commissioner Bill Nelson to order an investigation of what he called "workmen's compensation fraud."

Hy Cohen, a senior activist in West Palm Beach, said he attends the coalition's meetings regularly. "This independent contractor scam is stripping workers of their rights and benefits. It is a scheme to break the unions."

It is now standard procedure, he said, for building contractors to pay their workers in cash with no deductions for income taxes, social security, unemployment insurance, workmen's compensation or any other benefit.

"These corporations are pocketing millions in extra profits by not paying payroll taxes," Cohen said. "It's going on all over ... and now Congress is trying to legalize it."

In Florida, 95 percent of the drywall mechanics and 98 percent of roofers are 'contractors.' "They can't turn to the Labor Department for protection." he said.

"These construction companies want to pit workers against each other. They want to push us back to the days before we had unions and won these [protections] and benefits."