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Dispute over Hagerstown seamstresses' work status prompts Md. bill

Firm disputes state's claim it must pay unemployment insurance

Firm disputes state's claim it must pay unemployment insurance

February 28, 2008|By ANDREW SCHOTZ

ANNAPOLIS - A battle between the state and a Hagerstown business focuses on dozens of older women who stitch handicrafts in their homes.

Are they employees or independent contractors?

The distinction will determine whether Alice's Home & Cottage must pay unemployment insurance for the women.

The Maryland Department of Labor, Licensing and Regulation (DLLR) considers them employees, which would be covered.

Business owners Alice and Per-Olof Backman, however, argue that the women closely meet the definition of independent contractor.

Being forced to pay unemployment insurance for up to 60 more people could break the business financially, they said Wednesday after testifying at a bill hearing.

Aside from the seamstresses, the company has eight employees.

The dispute, and another one like it, prompted Del. LeRoy E. Myers Jr., R-Washington/Allegany, to file a bill to help the Backmans' cause.

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The bill was heard Wednesday before the House Economic Matters Committee.

The other case involves David and Jennifer Kauffman, who own a Cumberland, Md., music shop. The state has determined that people who rent space at the shop to give music lessons are employees, too.

Myers told the committee that Maryland's law on providing unemployment insurance for employees already exempts a barber who rents a chair at a shop and other loosely tied work relationships.

His bill would add people who give music lessons and seamstresses in similar situations as eligible exemptions.

Susan R. Bass, DLLR's chief of policy and planning, testified that the state uses a three-step test to decide if someone is an employee.

The first part is if the worker is under the "direction and control" of the business.

The second part is if the work is the same nature as what goes on at the company. At a jewelry business, she said, accounting would be separate, but watch repair probably wouldn't be.

The third part is whether the work is outside the place and course of business.

"Fail one part, fail it all," Bass said.

DLLR errs on the side of coverage, she said.

David Kauffman said music teachers who use the shop set their own lesson times and rates. The teachers "are not under my employ," he said.

Alice Backman said 15 to 60 seamstresses work on projects for her out of their homes, depending on the season.

She said her company's profit margin is low, so it can compete with overseas businesses, and she can't afford the extra coverage.

Of the state's 20 standards to gauge if someone is an independent contractor, her company's relationship with its seamstresses meets at least 19, Backman said.

Several seamstresses attended the hearing and said afterward that they support the Backmans' stance.

Wilma Fletcher of Little Orleans, Md., said she and other seamstresses who lost jobs when London Fog shut down its factory caught on with Alice's Home & Cottage. For many, it's a supplement to their Social Security income.

"If I choose not to work, I don't work ..." Fletcher said.

Kim Weiss of Clearville, Pa., said the arrangement works well for her.

When her children were in school and she was caring for her husband, who received a kidney and a pancreas transplant, "I could work at my leisure," Weiss said.

Myers' bill drew mixed reactions from committee members.

Del. David D. Rudolph, D-Cecil, said the seamstresses are "clearly independent contractors."

But Del. Brian J. Feldman, D-Montgomery, questioned the piecemeal weakening of the current law.

"If we start carving out exemptions, we've got a whole Pandora's box," he said.

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