The Legislature’s business committees usually pass laws each year on telecommunications, economic development and consumer protection.
But this year some of their work was derailed when opponents quashed a controversial labor bill that would have allowed more widespread use of independent contractors in place of employees.
The House Committee on Commerce and Economic Development passed the independent contractor bill March 16 — about six weeks into the legislative session. The bill eventually died in the Ways and Means Committee.
The Commerce Committee also passed an economic development bill and a telecommunications bill, but both came after a procedural deadline, and only the economic development bill made it past hurdles in the Senate.
One controversial initiative — the Vermont Employment Growth Incentive, which offers tax rebates to companies that create jobs — was extended for a few years. And the Enterprise Fund — used early in the session to quietly give $1 million to a multinational company — was eliminated.
The Senate and House also passed a paid sick leave law, putting Vermont on track to mandating paid leave for many employees within a few years.
Independent contractors
H.867 soared through the first half of the legislative session as House Commerce brought in conservative business interests to testify about the high cost of labor in Vermont, and lawmakers on the committee took their complaints to heart.
The witnesses included representatives of the Vermont Building and Construction Trades Council, the Associated General Contractors of Vermont, and the Associated Industries of Vermont.
The 11 committee members eventually agreed on a bill striking Vermont’s current laws that say a person who does the core work of a business is an employee rather than an independent contractor.
Under the bill, independent contractors could perform the same work that employees do as long as they were registered as businesses with the Secretary of State’s office and held themselves out as businesses to the general public. The committee passed the bill unanimously March 16.
House Speaker Shap Smith, D-Morristown, slowed down the bill, sending it to the pro-labor House Committee on General, Housing and Military Affairs for more testimony, which lasted a week. Although many expected the bill to then be sent out to the floor for a vote, the vote was delayed for a second time.
On March 31, Rep. Bill Botzow, D-Pownal, the chair of House Commerce, moved the bill back into his committee. He worked with labor interests to come up with language that would make a worker’s classification based on a “totality of circumstances,” rather than allowing people to be contractors because they registered with the secretary of state.
Labor interests were happier with the new language, but not satisfied. Conservative business interests, including the Associated Industries of Vermont, did not like the “totality of circumstances” language. After the committee failed to reach a consensus, Botzow killed H.867.
Republicans brought the bill back to life after advocacy from Rep. Heidi Scheuermann, R-Stowe, a staunch supporter of the bill who sits on House Commerce.
A colleague of Scheuermann’s, Rep. Kurt Wright, R-Burlington, planned to ask the House to “relieve” House Commerce of its duties, a procedural move that would bring H.867 in its original form straight to the floor. When Botzow found out, he made the motion himself, and testimony was scheduled.
Around 9 p.m. on May 2, one of the last days of the session, Rep. Chris Pearson, P-Burlington, asked the House speaker to move the bill to House Ways and Means because it had the potential to change revenue to Vermont’s unemployment insurance fund. Smith agreed, and the bill died for the biennium.
Despite the rocky politics around the bill, supporters and opponents of H.867 agree that the issue of independent contractor classification is not going away. Tension continues over whether labor laws preventing independent contractors from performing core work functions for a business are helpful or hurtful to consultants and small businesses.
Paid personal leave passes early
A bill to guarantee paid personal leave to thousands of private sector workers soared through the Senate early in the session with few major changes. Gov. Peter Shumlin signed the bill March 9, making Vermont the fifth state to enact such a law.
Act 69, will allow full- and part-time permanent employees to take time off for sickness, taking care of a child, going to a preventive medical appointment, or addressing life issues surrounding domestic violence. The law does not apply to seasonal employees, substitute teachers and certain other categories of workers.
Starting Jan. 1, employers with five or more full-time employees must offer up to three days of paid time off to their permanent employees. On Jan. 1, 2018, employers of all sizes will be required to offer up to five days of paid time off to the same workers.
The Senate’s added a delay to the House-passed bill that gives small businesses more time to comply with the law. The Senate gave the bill preliminary approval Feb. 3, and blocked an exemption for small companies. Patti Komline, a Republican House member who opposed the bill, worked with Sen. Bill Doyle, R-Washington, on a maneuver in which he changed his vote to no a day after voting yes.
Senate President Pro Tem John Campbell, D-Windsor, was a strong supporter of the bill and derailed the last-ditch move by Republicans.
Campbell persuaded the Senate to adopt language that would direct the Shumlin administration to present a study on the impact on small businesses by the end of the summer, and delay implementation for small businesses until Jan. 1, 2018.
President Barack Obama praised Vermont for enacting the law: “This action means thousands of families will no longer have to choose between losing income and taking care of a sick child. It’s a choice no one should have to make.”
“I’m once again calling on Congress to help us catch up with other advanced nations and provide this basic security to all Americans,” Obama said. “Until Congress acts, I urge other states to follow Vermont’s lead.”
Oversight of Vermont Employment Growth Incentive
Lawmakers extended the Vermont Employment Growth Incentive, or VEGI, program through 2021 as part of this year’s economic development bill, H.868. Without the bill, the program would have ended in 2017.
The VEGI program is a performance based cash incentive program that the state uses to attract and retain businesses. In order to qualify for the incentives, companies must prove they have met job creation targets. Keurig Green Mountain, Cabot Hosiery and Dealer.com are a few of the dozens of companies that have used the state subsidy program.
H.868 directs the Vermont Economic Progress Council, which administers VEGI, to provide a report to the Legislature by Jan. 15. The council is required to analyze whether the state should be able to recapture incentives and whether changes to the program could help small businesses.
The four-year extension falls short of what the Agency of Commerce and Community Development advocated for — a permanent extension of the program. The House Ways and Means Committee pushed to extend the law for just three years and until an independent audit of the program is conducted.
Rep. Janet Ancel, D-Calais, the chair of House Ways and Means, said she lost some parts of the negotiation but won others. She said the most substantial win from her perspective is a provision that requires a four-person technical working group to convene to answer questions about the VEGI formula.
The bill directs the technical working group, which includes representation from the Agency of Commerce and Community Development and the Joint Fiscal Office, to submit a report by Aug. 15 that analyzes the formula used to award VEGI money.
The report will compare how much a company would have grown without state money to how much a typical company in the industry would have grown without state money. Currently, the state awards grants based, in part, on whether the incentives would help the company add more jobs than a typical company in a given sector.
“If you’re going to make a finding that these jobs wouldn’t happen without the VEGI incentives, you have to compare them to the background growth that would happen no matter what,” Ancel said. “Obviously if you’re looking at a company that’s growing on its own … that gives you a different picture.”
Lawmakers drain, kill the Enterprise Fund
The Legislature drained and eliminated the controversial Enterprise Fund, created in 2014 to give Gov. Peter Shumlin a special account to help persuade IBM to stay in Essex Junction if it ever threatened to leave. The company paid GlobalFoundries $1.5 billion to take over the plant before the governor ever sought to use the fund. Shumlin had hoped to extend the Enterprise Fund past a sunset date of June 30, 2017.
But the Legislature eliminated the fund in an early session maneuver. As part of the budget adjustment bill, H.611, the Legislature moved the remaining money that was sitting in the Enterprise Fund back into the general fund, and when Shumlin signed H.611 on March 8, the cash incentive fund was effectively eliminated.
The Enterprise Fund has been criticized since Shumlin created it in 2014 because it gave the governor discretion to give the money businesses as he wished with very little legislative oversight. It also did not require companies to provide the state with information about how the money is spent.
The fund came into the spotlight again Jan. 8, when VTDigger exposed a secret early morning meeting that Shumlin called with the Emergency Board to give GlobalFoundries $1 million from the fund. The administration did not tell the news media about the meeting until late in the afternoon the day before, and the name of the company was kept confidential.
Leading up to the secret meeting, more than 50 lawmakers, including progressives, Democrats, Republicans and independents, opposed the appropriation to the unnamed company, which turned out to be GlobalFoundries. That put the Enterprise Fund under a cloud for the legislative session, setting up an environment in which lawmakers were determined quietly kill the fund during the fiscal year 2016 budget adjustment process.
“It’s disappointing,” said Scott Coriell, the spokesperson for Shumlin. “The fund provided a tool to help Vermont attract and retain good jobs, and it worked. Had it not existed, we may not have secured a new company in the Northeast Kingdom that will create 75 jobs, 70 new jobs in the Bethel-Royalton area, or the transition of 100 temporary jobs to full-time at GlobalFoundries.”
When GlobalFoundries representative Janet Bombardier made the pitch for $1 million on Jan. 8, she did not say that GlobalFoundries’ interest in staying was contingent on the state award. Days later, another GlobalFoundries representative told Seven Days that the $1 million could not be directly linked to new jobs.
Ancel, from House Ways and Means, helped push to end the Enterprise Fund. “I felt very strongly, and I think I said so publicly, once we had moved money out of the Enterprise Fund, we should not put any more money in,” she said. “I didn’t feel it was a good way to do economic development.”
“It was set up to deal with a particular situation, and it got diverted to various other uses,” Ancel said. “I think it’s one of those things that you can learn from and you can learn not to do it again.”
Other economic development provisions
H.868 is more than 100 pages and includes changes to Medicaid for working people with disabilities and language to help the state encourage people with disabilities to save money.
The bill extends a downpayment assistance program created in 2015. The program authorizes the Vermont Housing Finance Agency to give certain first-time homebuyers a $5,000 interest-free loan to help with the purchase; the money must be repaid once the owners sell the home.
The bill extends funding for the downpayment assistance program to seven years in order to turn the program’s funding into essentially a revolving loan fund, and therefore extend the downpayment assistance program indefinitely.
H.868 also extends the lending power of the Vermont Economic Development Authority, or VEDA, a quasi-public nonprofit organization. The bill authorizes VEDA to lend up to $155 million total, an increase from $130 million.
Sen. Kevin Mullin, R-Rutland, the chair of the Senate Economic Development Committee, called H.868 a “technical corrections bill” that does very little to create jobs. He said changes in the liquor bill and the tax bill do more for the economy.
“We did more job creation in other bills, for example in the tax bill where we created the TIF for downtown Burlington,” Mullin said. “I think that’s a major program that’s going to transform the Burlington downtown.”
The tax bill, H.873, allows the city of Burlington to use tax increment financing, or TIF, to build public infrastructure with additional property tax revenue the state will receive through the planned redevelopment of the Burlington Town Center property.
The liquor bill, S.250, changes Vermont law that says a person has to be a U.S. citizen and a majority owner in a company to receive a liquor license. Mullin said he heard from a woman in Middlebury who owns a 50-50 stake in a company with her immigrant husband. Mullin said the change would help the couple get a liquor license.
S.20 is a health care bill that would create a profession called dental therapy, which requires more education than a dental hygienist and less than a dentist. Rep. Paul Dame, R-Essex Junction, said the bill creates jobs at virtually no cost to the state.
Online dating scams and consumer protections
This year’s consumer protection bill, H.84, started out in the Senate Economic Development Committee. The panel abandoned consumer protections for online dating in 2015 and vowed to take up the issue first thing in 2016.
H.84 requires online dating companies to provide notifications to current users who may have interacted with online profiles that were found to be used by so-called catfish scammers, who create fake identities.
Within 24 hours of banning the scammer, the online dating company must provide Vermont users with the scammer’s identification information, disclose that the person was banned for possible scamming, and warn users not to send money or personal financial information to another member.
The bill gives online dating companies limited immunity from lawsuits for deciding to ban members who may be catfish scammers. The online dating bill the House passed in 2015 would have given companies total immunity from lawsuits.
The consumer protection bill also includes regulatory changes for lawsuit loan companies, structured settlement agreements, phony discount membership programs and Vermont’s licensed lender laws.
Telecommunications bill falls on its face
The House Commerce Committee passed a bill, H.870, that would have increased Vermont’s universal service fee by a half percentage point for five years to fund more broadband buildout, especially for rural schools that serve low-income children.
The committee’s version of the bill also sought $1 million in bonded money to fund the Connectivity Initiative, a program that started in 2014 to help the state give grants to telecommunications companies to bring broadband to areas the companies say they would not serve without subsidies.
The measures passed the House with funding reduced from $1 million to $750,000. However, because the bill came out of committee after a procedural deadline, it was never taken up for debate in the Senate and died in the Rules Committee.
In the end, the Senate added language regarding cell-tower siting to H.577, a miscellaneous utility bill, and rejected the House’s last-ditch effort to add the entire telecommunications bill to S.55, a bill related to Vermont’s estate tax.
Separately, the Senate approved $300,000 in bonded money for broadband buildout, a reduction from what the House sought. The state may also recoup $2.6 million for the Connectivity Initiative if the Vermont Telephone Co. fails to deliver voice service to 2,000 Vermonters by late 2017.
