House Bill 1701 sets up level playing field for ethical general contractors competing in tightly-squeezed construction industry

OLYMPIA – Lawmakers in the state House of Representatives approved legislation Friday night designed to take a significant bite out of the estimated $100 million lost annually to Washington taxpayers by illegal activity in the underground construction economy. Sponsored by Rep. Timm Ormsby (D-Spokane), HB 1701 clamps down on unscrupulous general contractors who populate job sites with so-called “independent contractors” in an effort to skirt employment laws and avoid payment of unemployment and workers’ compensation taxes they would owe if the workers were properly classified as employees.

“There’s no disputing the fact that this is a huge problem in Washington, and in fact the independent-contractor dynamic was the whole reason we started the underground-economy task force,” Ormsby said. “We want to provide equity for contractors who are doing things right. The overuse of this independent contractor scheme is costing the state a lot of money, and it’s costing honest contractors their ability to secure jobs, to compete on a level playing field.”

The bill, which was endorsed by a wide range of contractors, subcontractors and construction employees alike, requires contractors hoping to classify workers as subcontractors to satisfy several criteria. Among them: a legitimate subcontractor is free from the general contractor’s direction and control; provides his or her own tools; and maintains his or her own books and records. Failure to meet these criteria automatically classifies the workers as employees.

Ormsby’s bill, which now moves to the Senate, would impose a fine of $500 for a first offense and $2500 for a second (but also allows for an optional training class instead of the first fine). Third and subsequent offenses would earn the violator a $5000 fine and a one-year suspension of the contractor’s certificate of registration.

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