Patrick to create task force on underground economy

Businesses who operate under-the-table and employers who break employment laws will be the focus of a task force Gov. Deval Patrick is poised to create on Wednesday.

Patrick plans to sign an executive order establish a Joint Force on the Underground Economy and Employment Misclassification, according to a State House source briefed on the announcement.

Advocates for tightening penalties against businesses engaging in illegal activities say so-called underground economy businesses drain the state’s economy through fraudulent practices.

Mark Erlich, executive secretary treasurer of the New England Regional Council of Carpenters, called the measure “long, long, overdue.”

“State budgets are tight. Here is an opportunity to raise revenues without raising taxes,” said Erlich.

Citing a 2004 Harvard University study, Erlich said the state loses about $152 million in state income tax revenue due to the underground economy. Erlich also said the underground economy hurts Social Security and Medicare coffers and causes losses for insurance companies.

The underground economy is prevalent in industries like construction, domestic services and landscaping, said John Regan, executive vice president government affairs at Associated Industries of Massachusetts. Some employers don’t cover employees with workers’ compensation or unemployment insurance. Employers in compliance with state law end up paying for uncovered workers because they fund a statewide pool of funds, he said.

“The underground economy is everywhere,” said Regan, who also serves as a member of two state Labor Department advisory councils.

Task force members, according to the source briefed on the announcement, will meet regularly and promote the sharing of investigative information across state agencies. Members will also promote increased enforcement efforts against employers who engage in fraudulent business practices. The task force will encourage local employers and employees with firsthand knowledge of illegal activities to share information. The group will also target industries where the underground economy is most prevalent and review existing laws and regulations.

Director of Labor George Noel will chair the group. Members of the task force include representatives from 11 state agencies, including the Department of Labor, the Attorney General’s Office of Fair Labor, the Division of Professional Licensure, and the Department of Public Safety.

The governor will sign the order Wednesday at the 89th Annual Conference of the Massachusetts Building Trades Council in Plymouth, according to Department of Labor officials.

The rise in construction work-related deaths of undocumented workers is another reason to push the policy initiative, Erlich said. “They die and nobody notices,” he said.