Legislators Introduce Bills to Boost Responsible Business Practices

Democratic lawmakers unveiled a package of bills Thursday designed to “level the playing field” and promote responsible business practices across the business and construction communities.

The measures, which range from cracking down on contractors who do not have Delaware business licenses to allowing for anonymous reporting of license violations, are designed to root out “bad actors” in business and construction industries and ensure that all entities are playing by the rules, said House Majority Leader Rep. Valerie Longhurst, who is sponsoring one of the four bills being filed.

“The vast majority of companies that operate in Delaware follow the rules and do what’s required of them. However, we often hear of a few businesses that don’t,” said Rep. Longhurst, D-Bear. “So, what we’re proposing today are a series of bills that will close some of the loopholes and shortcuts that some companies take and ensure that everyone follows the rules we have on the books. In some cases, this could lead to added revenue for the state.”

Rep. Longhurst’s bill, House Bill 270, would require that contractors, subcontractors and independent contractors performing work under a public works contract obtain an occupational and/or business license within 30 days of being awarded the contract. The measure would also require all contractors to verify that their subcontractors and independent contractors have an occupational and/or business license. A violation of this new section could result in a civil penalty.

“If taxpayer dollars are going to be spent on a project, it just makes sense that the company that receives the contract must have a Delaware license,” said Rep. Longhurst D-Bear. “The contractors are doing business here in Delaware, which means they should be licensed and pay taxes. Most companies already do this, but this will make sure everyone is playing by the same rules.”

According to the Division of Revenue, nearly 650 businesses were assessed a $200 penalty during the past two fiscal years (2012-13) for failing to obtain a Delaware business license. This is for all businesses, not just those engaged in public works contracts.

House Bill 269, sponsored by Rep. Charles Potter Jr., would require the Department of Finance to provide an anonymous system to allow the reporting of individuals who fail to obtain an occupational or business license. Currently, citizens who want to tip off the state about possible violations must give their names, which Rep. Potter said discourages people from being whistleblowers.

“When someone sees something wrong, they should feel comfortable bringing that issue to light without fear,” said Rep. Potter, D-Wilmington North. “Other agencies and programs use anonymous reporting to allow people to provide tips, which the department can check out and verify. Our goal should be more reporting of possible violations, which will crack down on people who are not following the law.”

House Bill 271, sponsored by Rep. Dennis E. Williams, would require the Division of Professional Regulation (DPR) to notify the Department of Finance of any person who practices a profession without a license and who DPR believes should have a business or occupational license.

Professionals in dozens of fields – such as barbering, funeral services, nursing and plumbing – are required to obtain professional licenses that show compliance with minimum standards to practice in their fields. They also must hold valid business licenses from the Department of Finance for tax and accounting purposes.

A person operating without a professional license likely does not have a business or occupational license – and might not be paying taxes, either – but there currently is no mechanism requiring the Division of Professional Regulation to report a person engaging in an unlicensed practice to the Department of Finance, Rep. Williams said. According to the Division of Professional Regulation, there have been nearly 500 substantiated claims of operating without a professional license during fiscal years 2011-13.

“It’s reasonable to assume that a person who is cutting hair or practicing physical therapy without a professional license is probably not paying taxes on income,” said Rep. Williams, D-Talleyville. “This bill will close that loophole and make sure that the two state agencies that handle the licensing of professionals work together to address the problem and hold violators accountable.”

House Bill 268, sponsored by Rep. Trey Paradee, would ensure that the Division of Motor Vehicles must have proof of a valid business license before registering a company vehicle. A business currently can register a business vehicle, which can carry tax write-offs, with DMV without actually having a valid business license in Delaware.

“It just makes sense that if you’re going to register your car or truck as a corporate vehicle that you have a valid business license in the state,” said Rep. Paradee, D-West Dover. “DMV can easily perform this check before registering a vehicle, and this will give them the ability to enforce that practice.”

Associated Builders and Contractors Delaware chapter president Ed Capodanno said his organization supports the bills because it will create a level playing field for contractors who perform state-funded construction projects.

“We believe that all contractors doing work should be licensed and paying the taxes to Delaware associated with doing work in our state,” Mr. Capodanno said. “Our Delaware contractors comply with these requirements every year and contractors who are interested in doing work in our state must be made to adhere to these as well. We think this is a great step forward for both the Delaware construction community and the state of Delaware.”

James Maravelias, President of Laborers’ Local 199, speaking on behalf of the Delaware Building and Construction Trades Council, agreed that the bills are good for Delaware.

“It’s important to close these loopholes because it stands to reason that if these businesses are taking shortcuts in these practices, they could also be taking shortcuts in worker safety and quality construction practices,” Mr. Maravelias said.