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Carona To Lay Out Payroll Fraud Bill Next Week

Following at least a month of weekly stakeholders meetings, Senator John Carona is set to lay out his vision for dealing with worker misclassification in a Texas Senate committee next Tuesday.

The Dallas Republican's Senate Bill 676 is the result of balancing the need to fix the problem against the concerns of some players within the construction industry who don't want to the bill to go too far. The sticking points have included whether the state should create its own definition for subcontractor – rather than just stick with the IRS definition – and whether the specific amount for penalties should be written into the statute or set by the Workforce Commission on a case-by-case basis. The Texas Association of Business would prefer the latter option.

In the Texas House on Wednesday, Representative John Davis presented to the Economic & Small Business Development Committee his bill on this issue. HB 2015 would impose a $200 per worker fine for employees who are misclassified. While there are plenty of legitimate uses of subcontractors, there is growing consensus that there is abuse of that designation in the construction industry. Companies that do not misclassify their employees are at a competitive disadvantage because they’re on the hook for payroll taxes.

Representative Davis argues that the reason his bill is focused on government contracts is because, "I believe it's an appropriate area to begin.” During the hearing Wednesday night, Representative Paul Workman, R-Austin, had an exchange with a representative from the Workforce Commission in which this was made clear: Misclassification of workers is illegal, but there is currently no penalty for it under Texas law.

Davis left his bill pending in committee.

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