HAVERHILL — It's called the "underground economy,'' and it causes responsible businesspeople to suffer and customers to buy inferior products, state labor officials said.
A state group is targeting businesses that cheat the system by misclassifying workers as independent contractors when they should be earning a wage or salary.
At a public hearing at Northern Essex Community College, state Director of Labor George Noel said the misclassification makes it difficult for responsible employers to compete. It can lead to depressed wages and a lack of workers' compensation protection, and can prevent workers from getting unemployment insurance benefits, he said.
He said consumers all too often are impacted because they may end up purchasing potentially unregulated and unsafe goods and services.
At the hearing, Gov. Deval Patrick's Joint Task Force on the Underground Economy and Employee Misclassification heard from the region's business, labor and community leaders.
Noel chaired the event and said cheating by some businesses often involves off-the-books schemes.
"Think of home contractors, some of whom operate without a license and the proper insurance," Noel said. "What the joint task force is committed to safeguarding is the rights of workers in every industry, from every economic and social background."
Noel referenced a Harvard University study that shows Massachusetts lost nearly $100 million in unpaid income tax payments from its construction industry and another $100 million in unpaid workers' compensation contributions from 2001 to 2003.
The task force was formed as a result of an executive order signed earlier this year by Patrick in an effort to reduce workplace fraud. The joint task force plans additional sessions in other regions, including one in Worcester on Sept. 22. Citizens with questions, or who want to report suspected cases of workplace fraud, can do so anonymously by calling a toll free information referral line at 1-877-96-LABOR (52267). More information is available online at www.mass.gov/dol/labortaskforce.
