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Piano tuners or construction workers ? Labor Ready

Published: Sunday, May 19, 2002
Page: P1D
Byline: Scott Finn Larry Richards worked for Labor Ready, a temporary labor agency, 126 times in the last six years. He said he worked construction, landscaping, warehousing and other manual-labor jobs.

For 99 of those jobs, Labor Ready's payroll records listed Richards under the state workers' compensation category for "taxidermists, piano tuning." That's an abbreviation for workers' compensation Code 9520, which is described as "miscellaneous repair and maintenance. Includes piano tuning, taxidermists, chain saw repair, lawn mower repair, firearm repair." In a lawsuit filed by Charleston lawyer Mary McQuain, Richards said he never stuffed a deer's head, tuned a piano or fixed lawn mowers. Nor did he clean houses, though he was listed four times as "domestic, maid." Not once was he listed under the category for construction - the type of work he remembers doing the most.

In West Virginia, employers have to pay 10 times more in workers' compensation fees for a construction worker than for a taxidermist.

In another case in May 1999, Labor Ready sent about a dozen workers to B&B Contractors and Don Ramsey Electric. They also were listed under the code for "taxidermists, piano tuning" according to court records.

Union leaders accuse Labor Ready's managers of listing workers under the wrong workers' comp code to pump up company profits.

Labor Ready spokeswoman Stacey Burke said her company would not put up with managers who misclassify workers.

"We put 650,000 people to work. Mistakes will be made, but we would not accept deliberate misclassification." Labor Ready is one of the largest temporary employers in the United States, with West Virginia offices in South Charleston, Huntington and Parkersburg. The company specializes in manual labor, although its workers do everything from landscaping to catering, according to the company's Web site.

Former Labor Ready office workers allege the company changed workers' compensation codes to save money, too.

In the West Virginia lawsuit, former Labor Ready customer service representative Angela Sizemore testified that workers' compensation files were shredded and computer records were altered. Labor Ready's lawyer denies Sizemore's allegations.

In a Mother Jones article, former Labor Ready manager John Young said he and other supervisors were told by Labor Ready trainers to misclassify workers.

"They put ironworkers on codes that were indicative of just janitorial," he told the magazine. "I asked why they did that, and they said so they could save money." Justice delayed?

The state Workers' Compensation fund, already billions of dollars in debt, would be one victim of such a scheme. If a company like Labor Ready doesn't pay enough to cover injured workers, the state fund has to make up the difference.

Labor Ready had to pay thousands in back payments in other states after officials there audited the company. Washington state officials want more than $700,000 from the company for allegedly paying too little for premiums in just one year, 1998.

Two years ago, West Virginia workers' compensation officials tried to audit Labor Ready, but company employees refused to cooperate, according to court documents.

Last year, Labor Ready wanted to pull out of the state workers' comp system and insure itself. State officials again tried to audit company records, but they were turned away, according to a May 2001 letter from Self Insurance Director Lisa Teel.

"The [Workers' Compensation] Division has attempted to perform an audit of the company's records to determine whether the employees were properly classified. As of this date, Labor Ready has not cooperated with our attempts to obtain the necessary information," the letter reads.

"As a result, the Division cannot be assured that Labor Ready has reported its payroll properly and paid the appropriate premiums." Workers' Compensation officials recently sent a subpoena to Labor Ready asking for payroll records, but they've ignored it, said Robert Smith, commissioner of the Bureau of Employment Programs. He plans to get that subpoena enforced as soon as possible, he said.

If Labor Ready employees misclassified workers, the company might have to reimburse the state. Smith also said, "If the reports filed were intentionally false, we can turn over to law enforcement." Steve White of the Affiliated Construction Trades Foundation, a statewide labor organization, said he's glad to see the state move forward in its investigation. But he said it should have happened sooner. In October 2000, he gave state officials a report from the national Building and Construction Trades Foundation, alleging widespread misclassification of employees.

"Justice delayed is justice denied," he said.

'That's huge' Labor Ready already pays more than two times as much to workers' compensation as other employers in its class.

White said that's a sign that something is wrong, either with the company's safety record or how it classifies employees for workers' compensation.

Three years after a business opens, the state looks at its accident record to see if its workers have made more claims or fewer claims to Workers' Compensation than other similar businesses. They take the normal rate times the "experience modification factor" to determine how much the company will have to pay.

Labor Ready's "e-mod" factor is 2.35, or more than two times as high as similar businesses. That's up from last year, when the rate was 2.02.

When Smith found out about that rate, he expressed surprise.

"Geez, that's huge," he said. "We have very few employers at that rate. Very, very few. That's highly unusual." Labor Ready Mid-Atlantic, a subsidiary of Labor Ready Inc., went into default with Workers' Compensation in 1999 for not paying its full premium on time. The company is currently in default with the state Unemployment Compensation Division, according to the agency's Web site.

A growing problem Has Labor Ready cost the state more in workers' compensation payments than it has paid to the system? There's no way for the public to know, under current law.

In February 2001, a consultant named Rita Lynch did an analysis of Labor Ready for the Workers' Compensation Division that included that information.

The Sunday Gazette-Mail filed a Freedom of Information Act requesting that information, but BEP officials declined to release it, citing an exemption in state law designed to protect the privacy of employers.

Smith said his agency is trying to make sure temporary employers pay their fair share to Workers' Compensation. Every year, more temporary employers spring up in West Virginia - some provide a variety of manual workers, like Labor Ready, while others specialize in leasing workers to one industry, like coal mining.

"It's a challenge for us to make sure it's being done right," he said.

"Some people fear that leasing companies will become the next problem for workers' compensation, like the old [coal mining] contractors that go in and out of business." In the 1970s, some coal companies hired independent contractors to operate some of their mines. The companies usually owned the coal, told the contractors how to mine it and had the right to market it.

Many of those contractors ran up a big debt to Workers' Compensation, then filed for bankruptcy.

This year, several coal companies paid more than $56 million to the state as part of a lawsuit settlement over the issue.

Smith promised that his agency was on top of the problem this time.

They've drafted administrative rules to deal with some long-term labor leasing companies, but those rules specifically exempt "temporary help agencies" like Labor Ready.

"I was not aware of the significance of the allegations against Labor Ready," he said. "They're on my radar scope now." To contact staff writer Scott Finn, use e-mail or call 357-4323.

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