The Nov. 10 edition of the Hartford Business Journal featured a front page story “Cracking Down,” which discussed aggressive efforts by the Connecticut Department of Labor to “eradicate” the state’s “underground economy” of employers who violate state labor laws by paying employees under the table. The story quoted a Department of Labor officer to the effect that these scofflaw employers cost the state “untold millions” in uncollected tax revenue each year. “Untold” is a pretty big number, especially in light of the state’s current economic and cash woes.
As a lawyer I fully understand the need to enforce the law (and to advise clients accordingly). However, I would like to offer an alternative perspective on this story by putting it in the context of a phenomenon I have witnessed over 34 years in practice: the astounding increase in the complexity of just about everything we do. The employer-employee relationship and employment law are as good a case in point as any, and the question I will get to is this: Has the complexity become an end unto itself for so many of us that we forget what things are all about in the first place?
In its most basic form, employment is a contract — a “handshake” in which an employee agrees to perform services and the employer agrees to pay money for those services. Decades ago, and for good reason, the authority of the government was to regulate the terms under which these contracts could be formed with workers compensation, unemployment, health and safety, and other laws that provided necessary protection to employees who would otherwise be without the bargaining power to protect important personal interests.
Over time, additional layers of laws were laid down on the employer-employee contract — some by judicial decisions (recognition of the tort of wrongful termination for example), but more often by federal and state statutes and regulations. I took a ruler and measured the space occupied by the employment notices we are required to post in our office, and the posters that filled in the 25 square feet of space addressed the full panoply of rights and responsibilities applicable to our business: prohibited forms of discrimination, family and medical leave requirements, electronic monitoring notices, sexual harassment warnings, wage standards, and all the rest. The Commission on Human Rights and Opportunities (CHRO) wall poster reminds us that the CHRO will investigate allegations of unlawful discrimination without charge to the employee — a rigorous process that, as employers know, will cost them time and resources even if the complaint is baseless.
As these multiple layers of requirements were laid down over the years there were corresponding adjustments in the system. Employment law emerged as a “practice area” on both the plaintiff and the defense side of the calculus; boutique employment law firms and consultant practices arose; seminars and books were given and written about what to say, or not, in employee policy manuals; employers became guarded and defensive; and even the insurance industry got involved as “employment practices” insurance became a common policy to sell. The role of HR departments grew along a parallel path, largely playing a prophylactic role to mitigate the risk of wrongful termination claims or a CHRO investigation.
The growth of this systemic complexity gave life to those who work within it — the lawyers, consultants, and insurance agents mentioned in the previous paragraph, and, of course, the CHRO and other state employees who spend their days enforcing the complexity.
Let’s turn back to my alternative perspective on the Nov. 10 HBJ story about scofflaw employers. Employers understand full well that they buy an additional piece of this complexity with each new employee they hire. In this sense the complexity is a burden on the employer-employee relationship, almost a de facto tax in that it increases the cost of doing business — and the question is for whose benefit? Is there more benefit for the people who make a living in service to the complexity, or for the people (the employees) it is designed to protect? I don’t know the answer but intuitively my sense is that we are creating a lot of work, the cost of which is ultimately borne by a business community whose predominant focus should be on the creation of value.
All of the above is not reason to break the law, but it may explain why some people (including employees who accept cash to avoid income tax) are willing to take their chances by operating as far off the grid as they are able.
John M. Horak has practiced law at Reid and Riege P.C. in Hartford since 1980. The views expressed are his own.
