Labor Department Investigates Stowe Mountain Resort Construction Company
01/05/10 7:50AM By John Dillon
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(Host) The Vermont Department of Labor is investigating whether a New Hampshire construction company has improperly avoided payroll taxes by classifying its workers as independent contractors.
The issue has come to a head at the Stowe Mountain Resort, where workers have staged periodic protests.
VPR's John Dillon reports.
(Protester) "Hey, we're standing up for working people. Check out our website, it tells your all about what's going on up there."
(Dillon) John Jenney is dressed for the cold with his insulated hard hat and thick Carhartt jacket. Jenney needs all the layers he can wear. He's stood for hours in bone-chilling temperatures outside the main entrance to the Stowe Mountain Resort trying to get the attention of vacationing skiers.
(Protester) "We got law-breaking contractors taking your tax dollars, and not paying taxes with them."
(Driver) "Well, that's not a very good thing."
(Dillon) Jenney is a carpenter who worked for a year on the Stowe resort's $400 million expansion project. He was laid off after the first phase of the project was completed.
Jenney says a subcontractor on the job is cutting corners.
(Jenney) "They're not paying taxes. They're not paying Social Security taxes, not paying workers' compensation. And legitimate contractors - whether they're union or non-union - can't compete with them."
(Dillon) The Vermont Department of Labor is looking at whether a company on the job has "misclassified" employees as independent contractors.
(Powden) "We've had several complaints about that company and we are conducting an investigation."
(Dillon) Patricia Moulton Powden is the state labor commissioner. She says she can't say much more about the investigation until the results are in. But she says Vermont has stepped up enforcement on businesses that skirt state labor law. She says companies gain an unfair advantage if they avoid paying taxes. And workers could be left without coverage if they're laid off or get injured.
(Powden) "The consequences are if someone is not an employee, or if they are classified as independent contractors, then they would not be eligible for unemployment insurance and they would not be covered by workers' compensation insurance if they're injured on the job. And likewise the employer may not have those expenses."
(Dillon) Companies are required to make payments into the state's unemployment trust fund for employees on their payroll. Income taxes and Social Security are also withheld from the paycheck.
But independent contractors are paid a flat fee, and it's the worker's responsibility to pay their own taxes. Powden says there's a logical test for whether a worker should be paid as a regular wage employee, instead of as a contractor. The question is if the worker is under the direct control of the company.
(Powden) "So, if someone is going to work every day for the same employer who tells them, ‘Be here at this hour, you go home at that hour, you're doing this work,' even if you bring your own tools, you may be considered an employee."
(Dillon) Outside the resort entrance at Stowe, skiers come and go as pickup trucks with ladders and construction gear cruise in and out of the main entrance.
The luxury hotel towers over the Mountain Road. It's a massive construction job that employs hundreds of people.
A car with Massachusetts plates stops. And Carpenter John Jenney finds a receptive audience.
(Jenney) "We're trying to help standards in the construction industry."
(Jenney) "That's why we're here."
(Driver) "All right, man. I support you union guys."
(Jenney) "Oh thank you, we're union or non union, we're standing up for good standards in the industry.
(Driver) "Me too, brother. Happy Holidays."
(Dillon) Jenney and his colleagues point out that the Stowe Mountain Resort is owned by American International Group, a key player in last year's financial meltdown. AIG received billions of dollars in federal loans. And the U.S. Treasury now owns an 80 percent stake in the company.
The irony is not lost on Matt Durocher, an organizer with the carpenters union. He says a company that received a taxpayer bailout should do more for local workers.
(Durocher) "I had a hundred guys up here at one point. And I don't have one guy up here now. We're a local union from South Burlington, Vermont. All my guys are from Vermont. It's just a shame. And they've replaced us with people that aren't making anywhere near the money we make, or you should make."
(Dillon) Durocher has talked to labor department investigators, and he wants the state to make sure the contractors are following labor law.
(Durocher) "We've got Vermonters, 11 percent unemployment in the state of Vermont. We can't compete with this. It's not a union issue. It's a moral and what's right issue. These guys aren't getting paid correctly. They're way under area standards for pay."
(Dillon) But the main contractor on the job, Pizzagalli Construction of South Burlington, said the state conducted an audit last year and found no problems with its subcontractor. Pizzagalli Vice President Kevin McCarthy said the New Hampshire subcontractor - which is doing drywall work on the Stowe job - does pay payroll taxes as required by law.
For VPR News, I'm John Dillon in Stowe.