The battle to rein in the scourge of worker misclassification in the construction industry continues to play out at the national level and in state legislatures. As Construction Citizen readers are well aware, worker misclassification happens when employers intentionally pretend they have people working for them as subcontractors when, by law, those very people should be classified as employees and compensated as such.
It’s important to note that there are many legitimate uses of contract labor. The IRS has guidelines in place for who can and cannot be a subcontractor.
Unscrupulous business owners who misclassify workers do it as an easy way to avoid hourly wages and benefits like health insurance and retirement plans. Business owners who follow the rules – and that means the letter of the law – are at a disadvantage because those who cheat the system can underbid ethical companies by as much as roughly 30 percent when competing for work.
It is a perverse situation that punishes the good actors and rewards the bad.
In Georgia, state lawmakers have taken notice and may tackle the issue by putting into statute what has already been declared by the state’s highest court. The Georgie Supreme Court recently held that a worker can legitimately be considered an independent subcontractor only if the following apply to that individual:
- There are no territorial or geographic restrictions on the worker
- The worker is allowed to work for other companies or hold other employment
- The worker has no prescribed minimum hours to work
- The worker is free to accept or reject work without consequence
- The worker has discretion to set his or her own schedule
The Atlanta Business Chronicle reached out to those who represent commercial construction companies at the state capitol. Mark Woodall, director of government affairs for the Associated General Contractors of Georgia, told the Chronicle that stepped-up enforcement would be an excellent starting point. “Regardless of the standard we adopt, if we do not provide resources to enforce it, you’re never going to achieve compliance,” Woodall said.
As has been the case in Texas, a crackdown will likely be met with opposition from other sectors of the construction industry – specifically, residential builders – as well as completely different industries.
The President of the Georgia Motor Trucking Association, Ed Crowell, told the Business Chronicle legislation should only codify what the Georgia Supreme Court has already said and no more. “Legislation would have to be pretty tightly crafted,” Crowell said.
In Texas, the last few years have brought legislative progress on the problem but much more needs to be done to create a level playing field for ethical operators in commercial construction. In 2015, the Texas Legislature passed a crackdown on those who seek to avoid child support payments by becoming subcontractors.
Back in 2013, then-Gov. Rick Perry signed a bill into law that mandates “employers awarded a contract for public works must ensure that any individual performing services under the contract are properly classified as an employee or independent contractor.”