Payroll fraud (also called worker misclassification and workplace fraud) is the illegal practice of designating an employee as a "1099 worker" or an independent contractor. Unscrupulous employers do this to avoid paying payroll taxes, unemployment tax, or workers’ compensation insurance and are therefore able to submit lower bids for projects, undercutting responsible contractors. Several states have already passed laws to penalize those who cheat workers and taxing agencies in this way, and two bills are currently being considered which would provide federal legislation to end this practice and that of wage theft. They are The Fair Playing Field Act, introduced by Senator Kerry and a number of co-sponsors and The Employee Misclassification Prevention Act.

Federal agencies with oversight over various industries are taking the problem of worker misclassification more seriously and are taking steps to rein in as many bad actors as possible, according to various reports.

Worker misclassification, as you may know, happens when a company pays employees as independent subcontractors with the intent of skirting payroll taxes and denying benefits like health coverage. There are many legitimate uses of contract labor, of course, but the problem arises when companies use the classification to gain an unlawful competitive advantage and to deny basic protections for craft professionals and others. Companies that cheat on their payroll taxes can easily underbid law-abiding contractors by as much as 30 percent or more because of their illegitimate savings on labor costs.    Read more » about Report: Federal government is getting more serious about cracking down on worker misclassification

Last week, the News & Observer, a regional newspaper serving the Triangle region of North Carolina, published an op-ed by Doug Burton, owner of Whitman Masonry in Raleigh.

Burton has over 35 years’ experience in the construction business – 25 of which have been in an ownership position.  Whitman Masonry has completed projects for businesses, churches, and universities, and is well-respected in the region.  Like many other conscientious contractors who play by the rules, Whitman is frustrated by the unscrupulous contractors who get away with cheating the system by claiming that their employees are independent contractors – that they work for themselves.  In his article, Burton calls worker misclassification an epidemic:   Read more » about North Carolina Business Owner Speaks Out Against Worker Misclassification / Payroll Fraud

The news team at WFAA Television in Dallas/Fort Worth has done an oustanding job of highlighting the problem of worker misclassification. In their latest installment, reporter Byron Harris focuses on the story of Belen Valasquez:

"He has a vague memory of the construction fall that paralyzed him.

"I think I fell with my head doubled over," he said in Spanish. "I felt like I couldn't breathe. I got the wind knocked out of me."

Velasquez faces a lifetime of medical care that could total more than $11 million. He is now a tetrapelgic: He can't move his legs, and can barely move his arms.   Read more » about WFAA Report: Independent contracting costs workers and taxpayers [VIDEO]

The following article was authored by L.M. Sixel and originally published in the Houston Chronicle.

Employees and taxpayers foot most of the bill when workers get injured on the job, a new report from the U.S. Occupational Safety and Health Administration finds.

The cost-shifting stems from a combination of factors including an erosion of health and income benefits that no longer cover the cost of recovery, widespread under-reporting of on-the-job injuries and the growing practice of misclassifying employees so they don't qualify for workers compensation insurance, said David Michaels, assistant secretary of labor for occupational safety and health.    Read more » about Workers comp fails injured workers, Labor Dept. says

In an explosive investigation that drew the attention of many average Texans over the weekend, WFAA Television in Dallas/Fort Worth put a bright spotlight on the problem of worker misclassification. It’s a problem the Construction Citizen team has exposed for years and we greatly appreciate any time other media outlets take up the cause as well.

This most recent outrage came to light after three men working as independent subcontractors underneath Thanksgiving Tower in Dallas died in a horrific accident. But, the companies involved have denied damages to their families. How can that be? From the story:

Although they were little more than laborers, the State of Texas allows them to be called "independent contractors." That means they can get no workers compensation, and have no federal income tax or Social Security tax deducted from their paychecks.

Three independent contractors' deaths at Thanksgiving Tower are the subject of legal action, but the families of the three men will receive no compensation for their deaths. Byron Harris has more on the "invisible workers."   Read more » about DFW Television Report Puts Spotlight on Worker Misclassification

Over the years, the Construction Citizen team has put a bright spotlight on the myriad problems caused by worker misclassification. Those difficulties continue to mount while Texas lawmakers do very little about it, much to the frustration of ethical companies that cannot compete with cheaters, many single mothers who are denied child support payments, conservative activists upset about illegal immigration, and workers’ rights advocates who believe in a better standard of living for those who toil in the hot Texas sun.

Worker misclassification is one of the major underlying problems when it comes to fixing all those challenges.

If you're unfamiliar, worker misclassification is a fancy term for cheating on payroll. That’s why labor activists call it “payroll fraud.” It happens when a boss pretends their worker is an “independent subcontractor” instead of an employee even when, by law, the person should be on the books as an employee.   Read more » about Cheating by Unethical Employers Reaches Crisis Levels While Texas Lawmakers Sit on Their Hands

I love the construction industry and I speak from experience when telling you it has to be saved from itself. Since 1938, our family business has helped build the monuments of this city and this state. More importantly, our companies – like many others over the past 75 years – have helped tens of thousands of hard-working Americans enjoy an honorable blue collar, middle class standard of living. But, now our middle class is threatened like never before.

When I graduated from Texas A&M in 1969, after serving my active duty in the Marine Corps Reserves, I joined the local carpenters union as a drywall mechanic. Wages and benefits were very good and it was indeed a quality, middle class occupation. The non-union tradespeople enjoyed the same kind of lifestyle. We all received good hourly pay, overtime, worker’s compensation insurance protection and had employment taxes deducted and paid. There was a bond between company and worker.    Read more » about How the Construction Industry Can Help Save the American Middle Class

It has been almost a year since I became the executive director of Construction Career Collaborative (C3). While I have learned a great deal during that short period of time, my biggest take away is that everyone with whom I have spoken agrees that the issue of creating a sustainable craft workforce is critical to the future of the commercial construction industry and all of those connected to it.

For many trades, the complexity of this issue is the challenge (lack of craft and safety training, misclassification of craft workers as subcontractors thereby avoiding payment of overtime and payroll taxes such as social security, and not providing employee benefits or workers’ compensation insurance coverage, all in the pursuit of low bid and covered up by a seeming limitless supply of undocumented workers who labor in the shadows, which depresses wages). All of which is why C3 needs the leadership and support of a critical mass of organizations in the A/E/C industry in order overcome it. We all must recognize that there is no quick resolution to a workforce problem that has been compounding itself for more than 30 years and that will require perseverance and sheer numbers of people who believe in the cause to correct it.    Read more » about Achieving Critical Mass

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