VALPARAISO — The city council will consider an ordinance next month that could help prevent more construction companies working in Valparaiso from improperly listing their workers as independent contractors.
Councilman Robert Cotton, D-2, suggested the current ordinance be revised to be more restrictive.
His proposal would expand the city's oversight over developers seeking permits to build five or more housing units as part of a project that costs $250,000 or more.
It would require the permit holder to have access to accurate payroll records. The records would need to be available upon the request of the city's building director within five business days. Those found to be violating the ordinance would be issued a stop work order until they rectify the payroll issue and could be charged a fine or lose their permit.
In June 2016, the city adopted an ordinance adding payroll regulations for projects bid out by the city valued at $150,000 or more.
Cotton said he came up with the idea after hearing about similar ordinances and his personal research into the topic.
“I have come to understand the nature of how big the problem is,” he said. “You might say it's a national problem worth about half a billion dollars a year in lost tax revenue (federally).”
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Construction companies improperly classifying workers essentially denies them access to family and medical leave, unemployment insurance and minimum wage protection, among other protections given to non-contractor workers.
“Nothing will ever change if we can't enforce it at the local level,” Cotton said. “Not that everyone is cheating, but the handful of cheaters do a significant amount of damage to those fair contractors.”
Mayor Jon Costas suggested the city err on the side of caution on the proposal because adding regulations could put an undue burden on the government, and ultimately, taxpayers.
“I'm not saying regulations are superfluous. We don't see a history of (payroll fraud) in our city. We've had a few complaints," he said.
Economic Development Director Patrick Lyp said his experience has been there are contractors who skirt federal and state payroll law, but that it may be difficult for the city to enforce violations as well.
A finalized version of Cotton's proposed ordinance is expected to be discussed at the city council meeting on July 8.