Contractor Shawn Campbell brought in over a dozen Spanish-speaking immigrants to help build a new apartment complex in Renton. But he didn't call them employees; they were "business partners." Because of that designation, Campbell was able to avoid over $1 million in payments to the state workers' compensation fund and keep his employees working up to 46 hours a week with no overtime, a judge found. He slid through undetected for more than two years, until a disgruntled employee blew the whistle. It was a new twist in the ongoing battle between state regulators and shady contractors looking for a way to make tax evasion look legal on paper.

The construction industry as a whole cheats the state's unemployment and injured-worker insurance systems out of about $109 million each year, according to a Washington State Institute for Public Policy report published last November.

Employers have been finding ways to game the system since the first employee-protection tax laws were created in the 1930s, says attorney David Marks, who represents workers in wage-loss cases. Most of the avoiders take one of two approaches: pay workers in cash and keep them completely off the books, or declare employees to be "independent contractors."

In addition to being tax-exempt for employers, independent contractors don't qualify for overtime or workers' compensation. Using independent contractors, or freelancers, for specific projects is legal if they're truly independent. The problem, Marks says, is when an employer requires workers to sign on as something other than employees despite the fact that they work for no one else and take all direction, in terms of hours, projects, labor, and payment, from the employer.