Utah officials looking into worker reclassification practice

SALT LAKE CITY — Thousands of Utah construction workers are employed in dozens of large projects not as traditional laborers but as "owners" under a work force reclassification process that critics say could allow employers to avoid paying benefits, payroll taxes and workers compensation insurance, according to an investigation by KSL-TV.

The Utah Attorney General's Office and the Utah Labor Commission told KSL they are looking into the practice, which contractors say has allowed such companies to underbid competitors on construction projects by as much as 50 percent. Companies pursuing the practice say it is legal under Utah's limited liability laws and isn't designed to shirk any tax or payroll obligations.

But the dozens of construction firms that feel their businesses have been hurt by the practice are not shy in speaking out.

"They're just ravaging whatever jobs they can find," said Alan Burrow, superintendent of Draper-based Daw Construction Co.

Added Jeff Moffat of Moffat Brothers Plastering: "We usually get 30 (percent to) 35 percent of our bids, and right now we're at probably 5 percent of our bids."

More than 20 companies were represented at a recent meeting with KSL, convened after contractors sought help in exposing the so-called "reclassification" of laborers to owners to skate around traditional employer obligations.

An example, they say, is the company U & I LLC. On its website, U & I LLC says if a business signs up for its services, that business' "employees" become "owners" in U & I. But these owners "still work on the jobs that you assign and take instruction and direction from you." The only difference is businesses no longer have to cover payroll taxes, workers' compensation or unemployment. The website also says businesses that sign up will save a business "18 to 26 percent" on its labor costs.

A U & I LLC official told KSL that laborers are simply classified as "self-employed" and are given instructions and proper forms to ensure they pay taxes. Dean Kesler, a spokesman for U & I, said the business plan was reviewed by lawyers and accountants, and company officials are confident they are operating within legal boundaries.

The companies that specialize in such reclassification services are typically compensated by contractors they sign up for their services, which generally consist of advice and help facilitating the change in employment classifications for the respective work forces.