Investigation Reveals School Construction’s Worker Misclassification

WFAA News 8 TV in Dallas/Fort Worth aired an investigative report last night by David Schecter about the plight of worker misclassification in the Texas construction industry, and the lack of law enforcement by local and state entities.

Mansfield Independent School District’s $39 million Center for the Performing Arts currently under construction contracted with AB Rebar for part of the project.  Owner Macario Mireles was able to offer the lowest bid for the work because he pays his employees as independent contractors and does not pay payroll taxes, unemployment tax, or workers’ compensation insurance on behalf of them.  

News 8 interviewed Andy Anderson, owner of Linden Steel, a rebar contractor who lost the bid for the contract.  Anderson pays his workers as employees, paying all required taxes, and is frustrated with the fact that this often prevents him from winning contracts for jobs.  Speaking about the uneven playing field that bidding against companies such as AB Rebar places responsible companies in, Anderson stated:

“There’s just no way bona fide contractors are going to be able to compete with those guys.”

When asked why it is so important to him that existing laws be enforced, he stated emphatically that it is critical to maintain the “very fabric of how this country was built” and that everyone just needs “to do the right thing”.

News 8 spoke with Mansfield School Board President who claimed that all contractors on the project had to follow strict guidelines and that if those were not followed, the board would take action.

The report then focused on the Texas Workforce Commission (TWC) and their lack of enforcement of misclassification laws by offenders in the construction industry.  News 8 reported:

“The TWC is charged with enforcing the law by auditing companies in problem industries.  Construction is certainly a problem.  The University of Texas estimates a staggering 1 in 3 construction workers is misclassified, a huge loss to state unemployment fund – as much as $175 million each year.

“But what industries does the TWC audit most?　News 8 found:

• Dentists, 88% more than construction
• Lawyers, 80% more than construction
• Doctors, 68% more than construction”

Unscrupulous employers have little motivation to properly pay and classify their employees.  There is currently no state penalty for breaking the law by misclassifying workers and failing to pay payroll taxes.  If a company is audited and found to be in violation, they are ordered to pay the money owed without any additional penalty or interest.  The report mentioned the November 8 TWC hearing that representatives from Construction Citizen attended where the commissioners considered whether to recommend new legislation on misclassification.  Regarding the lack of teeth in Texas’ misclassification laws, News 8 explained:

“In November, TWC Commissioner Ronny Congleton tried to change that.  He voted for a resolution asking the legislature to impose penalties.  Fellow commissioners Andres Alcantar and Tom Pauken voted him down.”

The report concludes with a dire prediction from rebar contractor Andy Anderson:

“If government entities like Mansfield schools and the TWC cannot or will not level the playing field for legitimate contractors, Anderson says it won’t be long before they are gone, and their taxes too.”

Watch the entire 6 minute report: