The Associated Press May 26, 2011, 9:24AM ET

Contentious Conn. audit finds WWE owes $7K

A Connecticut audit of WWE that was an issue in the hotly contested 2010 Connecticut Senate race ultimately found the professional wrestling company owes around $7,000 in underpaid unemployment compensation, according to a WWE attorney.

In a letter to the state Department of Labor's field audit unit, dated Monday and obtained Wednesday by The Associated Press, the lawyer said Stamford-based WWE does not agree with the findings reached by the agency. But she said the company has decided reluctantly to pay the assessment for 2008 and 2009 to avoid further expenses.

"Given the small sums involved, compared against the costs of contesting your unilateral findings, WWE has determined it is most cost effective to simply pay the $7,316.64 assessment `under protest,'" wrote attorney Mary A. Gambardella. WWE said it did not receive a fine or any penalty following the probe, which it said began in the summer of 2009.

The confidential audit, which the state labor department will not confirm or deny, came to light during the Senate race when former WWE CEO Linda McMahon ran as a Republican candidate. She was challenging then-Democratic Attorney General Richard Blumenthal for the seat held by former U.S. Sen. Christopher Dodd.

McMahon's campaign said it believed the investigation was politically motivated. WWE said it began in summer 2009, when McMahon began considering he candidacy. Blumenthal denied that his office was involved.

Blumenthal, who ultimately won the Senate race, often referred to the probe during the campaign. He claimed it was an example of McMahon putting "profits ahead of people at every turn." At the time, the audit was described as an investigation into whether WWE was misclassifying its employees, namely wrestlers, to avoid paying various benefits.

The WWE's letter refers only to an audit concerning underpaid unemployment compensation. According to the letter, the audit also determined that WWE's payroll company overpaid on taxable payroll wages in both 2008 and 2009, creating a credit. WWE differed with the state's decision for five employees to be considered "talent" when most appeared only sporadically.

WWE also maintains that 23 people the state believes should be considered employees for purposes of unemployment compensation taxes were really temporary workers who no longer work for the company.

Five of them hold part-time jobs as "blurrers," people hired to edit images in the WWE's film archives to delete the old WWF logo following a lawsuit filed by the World Wildlife Federation.

Asked whether Blumenthal was satisfied with the audit, his Senate spokeswoman, Kate Hansen, did not refer specifically to the WWE case.

"Senator Blumenthal believes that misclassification of workers is a serious and pervasive offense that harms workers, taxpayers, and honest businesses -- and that addressing the problem must go beyond focusing on any one business or industry, to ensure employees receive proper wages and benefits," she said. "Businesses, especially our small businesses, deserve a fair chance to compete."

It's unknown what triggered the investigation. Carl Guzzardi, the labor department's unemployment insurance tax director, could not comment on the case because of state confidentiality statutes that prevent him from confirming or denying the existence of any investigation of any company.

Guzzardi said the department can randomly select a company for an audit, respond to public complaints or receive a referral from the state's Joint Enforcement Commission on Worker Misclassification. Blumenthal was a member of that commission when he was the state's attorney general.

Various state and federal agencies, besides the labor department's unemployment unit, can conduct audits relating to misclassification.

The labor department typically goes through a series of tests to determine whether an employee is truly a self-employed worker or a company employee.

Employers are required to pay an unemployment tax -- rates range from 1.9 percent to 6.8 percent -- on the first $15,000 of an employee's earnings. For a company that pays 3 percent, an average rate, they'd pay $450 a year per worker, Guzzardi said.

"We want to make sure that workers that are providing services in Connecticut have access to the unemployment insurance system if they're legally entitled to do so," he said. "That's our primary focus here."


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