The "Underground Economy"

The "Underground Economy" is a term used by the labor union community to refer to contractors and subcontractors who skirt public laws regarding contractor registration, payment of taxes and prevailing wages, and handle transactions in cash.

HB 1555 would address some of the concerns stemming from the underground economy. I find the bill to be unclear and technically flawed in a number of places. Generally, here's a quick summary of the bill from what I can gather:

1. Verify Contractor Registration. Agencies such as cities and others who issue business licenses would be required to verify that the applicant is a registered contractor with the Department of Labor and Industries if such registration is required. It may be difficult for agencies issuing the business licenses to make this determination.
2. Prevailing Wage Exemption. The bill would define what independent contractors do not meet the definition of "laborer, worker, or mechanic" for the purposes of being paid prevailing wages. The bill attempts to define when an individual is really an independent contractor and not subject to prevailing wages. This is a very confusing section. Read it and see what you think. If you have any insight into it, please let me know.
3. Purpose of Retainage. The bill would add the Employment Security Department and the Department of Labor and Industries as trust fund beneficiaries of the retainage. Interestingly, however, the bill does not require that public agencies obtain releases from these agencies prior to release of retainage.
4. Priority of Claims Against Retainage. The bill would insert the Employment Security Department and the Department of Labor and Industries into a tied third place position for the priority of claims against the retainage. First place would still be workers due prevailing wages and second place would still be the Department of Revenue. By inserting these two new departments into the priority list, subcontractors and suppliers would have less clout in terms of tapping into retainage for claims. Subcontractors and suppliers who form the backbone of our economy need better protection against contractors who fail to pay. Also, this section is very awkwardly written. I think my interpretation above is correct, but it's very confusing.

This legislation is technically flawed, confusing, and poor public policy.

There was a public hearing on the bill on January 28, 2009 before the House Commerce and Labor Committee.