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December 1, 1995

Audits target dishonest contractors in Washington

TUMWATER - The Department of Labor & Industries will perform more audits on construction contractors in Washington to ensure compliance with premium payments that finance benefits for injured workers.

The audits are necessary because contractors who fail to pay premiums drive up costs for honest contractors, said Doug Mathers, audit supervisor for Labor & Industries. Mathers said the department has found that some contractors will hire workers but tell them to become registered as subcontractors, believing they are not considered employees and not liable for industrial insurance payments.

However, registered subcontractors who are supervised or whose performance is controlled by the contractor are still covered and workers' compensation premiums must be paid by the contractor.

The problem of under-reporting or failure to report worker hours has grown in some segments of the construction industry, in particular the wallboard, or drywall, industry. Representatives of this industry have asked for the department's help in cracking down on drywall installers who cheat the system.

Failure to report worker hours enables dishonest drywall contractors to underbid their honest competitors, often by up to 30 percent.

And when an employee for a dishonest contractor is hurt on the job, honest employers end up footing the bill because they are the ones paying for benefits for injured workers.

"What it comes down to is that honest contractors are paying the costs," said Mark Shaffer, owner of Mark's Drywall in Lacey. "We are also losing work because our costs are higher than the dishonest contractors. This has been unchecked for too long and it's out of hand."

Claims from workers for unregistered drywall contractors have helped push up rates for the industry as a whole. Current premium rates for drywall installation are $4.45 an hour, or about $710 a month for a full-time employee, Shaffer said.

A study by Labor & Industries shows that since the mid-1980s construction has vastly increased throughout the state. But at the same time, reporting of drywall work has plunged and injuries to workers within the industry have increased.

In response, Labor & Industries is targeting records of drywall contractors to ensure all pay their fair share of premiums.

A similar department effort three years ago to crack down on dishonest employers within the reforestation industry garnered big payoffs - a 17 percent reduction in premiums rates in 1994 and a 36 percent cut in 1995.

"When contractors cheat in one area, they usually cheat in other areas, too," said Dick Mettler of the Northwest Wall and Ceiling Contractors Association, which represents 22 employers and 1,800 workers. "This means the consumer is apt to get cheated on the quality of the job. This audit effort will ultimately help consumers get the best product and service."

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