Utah legislators poised to take on business model that some say exploits construction workers

SALT LAKE CITY — A bipartisan group of Utah lawmakers is poised to take on a labor practice that reclassifies some workers as owners, allowing certain companies to skirt tax laws and employment protections.

The labor practice was first uncovered in a KSL 5 News investigation back in May.

"You exposed the people and your viewing audience to what it really was," Sen. Karen Mayne, D-West Valley City, said of KSL's story.

Mayne is alluding to the work force reclassification process of potentially thousands of Utah construction workers as "owners" under the limited liability corporation business model.

Critics say such a model exploits workers, now owners, who are responsible for covering their own payroll taxes, workers' compensation and employment benefits.

SB35 attempts to reign in the reach of some LLCs using the model to reclassify all workers as owners.

"In my mind's eye, this is landmark legislation," said Mayne, the chief sponsor of the bill. "This is as big as immigration because it has taken some of those people that were disadvantaged. They have put them in this kind of situation with (worker)/owners."

The West Valley senator says she made sure to have the support of the original author of the state's LLC laws, Sen. John Valentine, R-Orem. Valentine is co-sponsor of SB35.

"I gathered support. I went to friends. I went to colleagues. I went to those people that are involved. They came and we formed a group and that's where it started," Mayne said.

SB35 attempts to restrict those who are labeled owners of an LLC by establishing certain criteria: the owner must be an active manager, hold at least 20 percent ownership interest, and not be subject to workplace supervision.

"We just want to make sure everybody is working for the same goal. That is a good wage, doing a good job," said David Spatafore, a lobbyist hired by a consortium of construction industry business owners concerned about the effect of the labor practice.

"They want a ... level playing field," Spatafore said. "They want everyone in the construction industry to be good Utah citizens: pay good wages, withhold taxes, to pay workers comp for their workers in case of an injury, to pay unemployment compensation."