Misclassifying Workers as Independent Contractors
We have written numerous times about how widespread this issue has become in the construction industry, and now we see a new lawsuit filed by FedEx Ground that uses one of the oldest arguments we’ve heard: “It ain’t my problem! All of our folks are independent contractors. They hire their own workers and deliver for everyone and we have no control over them or what hours they drive. So, General Abbott, we don’t owe the Texas Workforce Commission any workers' comp fees.”
Legitimate? We don’t know yet. The courts will decide. What we do know is that when we hear that comment on the construction site we call it a “sub – sub” problem and usually the workers come up on the short end of that stick. On the construction site, the GC hires a sub that hires another sub to do the work and claims Independent Contractor and avoids FUTA, SUTA and any other taxes.
The Fedex suit against the Texas Workforce Commission is a reaction to that larger game going on in Texas with the payroll fraud and misclassification issue. You can find it in lots of industries like food service, janitorial services, residential construction and even in the oldest of professions. The recent UT study on Payroll fraud is revealing and the monies that the State is losing is considerable.
One thing that we know for certain is that unless we address some of these issues, the skilled labor shortage will become larger, the amount of rework caused by untrained and, in some cases, unsafe workers will cost our owners more. They will then pass those costs on to their tenants and users, and we all will lose.
By the way, the Texas Legislature needs to move forward on a misclass bill suited for the way we do business in Texas. At the same time, the Department of Labor and the IRS need to expand their enforcement in Texas like they are doing in several other states across the country.