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.

The National Football League faces a growing backlash over the way cheerleaders are compensated and the reason for it will sound very familiar to regular readers of Construction Citizen. Over the years, we’ve highlighted the practice of worker misclassification in our industry. Now other sectors of the economy are dealing with the issue in a variety of ways. Our industry insider Jim Kollaer noted just this week that the popular ride-sharing company Uber is under the legal microscope for whether its drivers should be classified as employees or independent contractors.

In the case of NFL cheerleaders, at least five lawsuits have been filed including one against the Oakland Raiders. The Oakland Raiderettes settled that lawsuit with the team’s owners for a reported $1.5 million.   Read more » about NFL Faces Lawsuits and Legislative Crackdowns Over the Way Cheerleaders are Paid

The construction industry has fought the issue of independent contractors with no benefits or employees with full benefits for the last decade. Now the startup Uber is in the middle of two suits, and the ultimate outcomes on those decisions will impact their viability in the future.

And it is not just Uber. The decisions on these cases in California could have an impact on the viability and growth of “on demand” startups and the personal service businesses like Uber. The startups and their business models are a perceived threat to the “old way of life” where you got a job and benefits and you stayed with that company or industry model until you retired.   Read more » about Independent Contractor or Employee? Uber Under Fire

Last May, the US Department of Labor signed a three-year agreement with the Rhode Island Department of Labor and Training (DLT) to battle worker misclassification by establishing a working relationship in which both agencies will share information and coordinate law enforcement.  According to a press release from the office of US DOL Secretary of Labor Thomas E. Perez:

“The [agreement] represents a new effort on the part of the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification. The Rhode Island Department of Labor and Training is the latest state agency to partner with the U.S. Labor Department. Alabama, California, Colorado, Connecticut, Florida, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New York, Utah, Washington, Wisconsin and Wyoming agencies have signed similar agreements.”   Read more » about Rhode Island Drywall Contractor Agrees to Pay $730K in Settlement with Workplace Fraud Unit

Today is a day of rest for those who toil in the hot sun or blistering cold every day to build Texas and the rest of America.  Millions regularly wake up before 5 am, drink their coffee, drive to a jobsite, and – just as they can start to see in the distance the structure on which they’ll work – they’re still about half an hour from parking the truck and getting down to business.  Many do that kind of work daily from sun up until sun down and never complain or even ask for a “thank you.”

The Texas Workforce Commission tells us there are more than 13 million workers “who are the backbone” of the Lone Star State.  “As we continue to experience positive growth, in job creation and labor force size, the people of the great state of Texas are able to benefit from the thriving economy and opportunities that come with expanding employment,” commissioners said in a statement on Friday.   Read more » about On Labor Day and Every Day, Construction Citizen Honors the Working Men and Women of America

More than two dozen states have now agreed to cooperate closely with the federal government to crack down on what’s known as “worker misclassification.”

Sometimes known as payroll fraud, worker misclassification has been called a “cancer” in the construction industry and other sectors of the economy as well. “Because of weak enforcement mechanisms, there are virtually no tangible consequences for violating the law,” said Professional Janitorial Services executive Don Dyer during a Texas House committee hearing on the subject last year. So far, Texas has taken a targeted approach to the problem but many advocates say it is simply not enough.    Read more » about Another state signals it will get serious about worker misclassification

Two men in Georgia have been arrested on federal charges that they intentionally misrepresented the employment classification of construction workers on a project for the Centers for Disease Control, which is headquartered in Atlanta. Cesar Arbelaez Tabares and Juan Carlos Bazantes were arraigned after prosecutors said both men "committed fraud in connection with a construction project" for the CDC.

Prosecutors said the men engaged in a somewhat elaborate scheme to defraud both the CDC and the Internal Revenue Service. Their actions caused IWES to fail to report over $800,000 in wages to the IRS, investigators said.    Read more » about Federal Charges Filed in Connection with Alleged Payroll Fraud Scheme in Georgia

“Jill Wells, an official of Engineers Against Poverty, an advocacy group in Britain, described the guidelines issued by CH2M as commendable. But, she said, the company’s actions were unlikely to have much practical impact because construction companies passed responsibility for worker welfare down to subcontractors.

“What the main contractors do is pass the risk down the subcontracting chain, and it is the workers on the bottom of the chain” who bear it, Ms. Wells said.” (New York Times)

The New York Times reported this week that the 2014 DLA Piper report on the mistreatment of workers on the construction sites for the 2022 World Cup has resulted in few changes even though the FIFA scandal and the concerns of Qatar were thought to bring about major changes.    Read more » about More Hearings on the FIFA Scandal

The administrator of the Department of Labor’s wage and hour division, Dr. David Weil, this week issued an administrative guidance document aimed to curb the misclassification of workers as 1099ers or independent contractors rather than employees. We would urge that you review it carefully, especially those of you in the construction industry.

This document comes out in the middle of an on-going argument over the misclassification and mistreatment of workers as reported on here in previous posts. The document entitled, “The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors” is sure to create a number of new questions especially in the new economy workforce.

The document begins by defining Misclassification.   Read more » about Department of Labor Administrator on Misclassification of Workers