CHELSEA—Today Senator John Kerry held a hearing to examine the impact of employers who fail to abide by lawful hiring practices and hear what steps Massachusetts has taken to address the underground economy. When employees are paid off the books or misclassified as a “contract employee,” companies are able to avoid paying certain employment taxes and benefits. As small businesses and labor leaders testified, this puts firms that play by the rules at a competitive disadvantage and results in tens of millions of dollars in unpaid income taxes and worker benefits in Massachusetts.

Congressman John Tierney (D-Salem) participated in the hearing which also featured testimony from Director of the Massachusetts Department of Labor George Noel and Assistant Attorney General Jennifer Stark who reported on the progress of a high-level task force devoted to finding new ways to deter companies from operating underground, and making sure the laws on the books are enforced.

“Cheaters and unscrupulous employers have created an underground economy as big as $1 trillion. Worse, workers right here in Massachusetts are being taken advantage of and not getting the benefits and protections they deserve,” said Senator Kerry, Chairman of the Committee on Small Business and Entrepreneurship. “When some employers misclassify workers or go off the books, it hurts all workers and businesses who play by the rules. We’ve got to level the playing field, enforce the laws, and ensure everyone who works an honest day gets a fair pay, Social Security, unemployment benefits, and other protections they’re entitled to.”

Congressman Tierney, a member of the House Committee on Education and Labor, recently co-authored the Taxpayer Responsibility, Accountability and Consistency (TRAC) Act, which seeks to prevent the improper classification of employees as independent contractors.

“The Senator’s leadership on this important issue for our economy is greatly appreciated. This hearing further highlighted how employee misclassification hurts workers, honest businesses and tax-payers. As the co-author of legislation that seeks to remedy this harmful practice, I believe that ensuring millions of workers are appropriately classified is a matter of fundamental fairness and good governance. I look forward to working with Senator Kerry on this matter,” said Congressman Tierney.

Scott Morrisey, a small business owner from Leominster, provides his workers with health, disability, and vacation benefits which puts him at a 20-25 percent disadvantage with competitors. He testified that an “underground” labor force is not necessary to get work done but that good management and oversight is being supplanted by a lower skilled, less productive, higher volume workforce. Saugus small business owner Sara Stafford submitted testimony detailing how a competitor underbid her by 15 percent for a construction project because the competitor used undocumented workers, misclassified employees in order to pay lower wages, and failed to pay benefits to workers in cash as the company reported in forms.

Frank Callahan, President of the Massachusetts Building Trades Council, spoke in favor of legislation sponsored by Representatives Tierney and Richard A. Neal (D-Springfield) that addresses the issue of misclassifying workers as independent contractors. Mark Erlich, Executive Secretary-Treasurer of the New England Regional Council of Carpenters testified that the practice of classifying workers as independent contractors is not only having a negative effect on the ability of contractors to compete fairly, but also on the safety and health of workers.