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Looming Texas Payroll Fraud Crackdown Gets National Attention

The debate over payroll fraud in Texas is now in the national spotlight.

Fox News Correspondent Casey Stegall traveled to Austin to cover the story, where he reported on what the Texas Workforce Commission has endorsed as the forthcoming study from the University of Texas.  University of Texas researchers have found that more than 40 percent of construction workers in Texas are misclassified.

In his report, Stegall points out that many have called for increased audits by the TWC:

“To bring change, a spokeswoman for the Texas Workforce Commission says the agency is enhancing its audit system to find and track down more of these offenders.

“The commission’s board also unanimously voted to submit a legislative proposal to get new laws on the books to crack down on the problem. The details of that proposal are still being ironed out but the agency hopes to take advantage of the current legislative session to usher in change.

“Under the current system, if an employer is found to be skirting the law, they’re required to pay back taxes and interest but there is no set financial penalty and they face no criminal charges.

"‘We can assess fines based on the late payment of those taxes,’ said Lisa Givens of the Texas Workforce Commission.  ‘Assessing those taxes as far back as we can determine that they're owed. There are late payment penalties, so we go ahead and ask for those things from the employer.’”

Meantime, the Texas Tribune reports that State Representative Joe Deshotel, D-Beaumont, has filed a bill called the “Workplace Fraud Prevention Act”.  From the Tribune:

“House Bill 372, also known as the Workplace Fraud Prevention Act and filed by state Rep. Joe Deshotel, D-Beaumont, would levy fines of up to $5,000 on business owners for each employee not properly classified as such – a practice used often in the construction industry to avoid paying taxes, supplying fair wages or providing benefits to employees.  Instead, employers may classify their workers as independent contractors to circumvent the necessary payroll requirements.  The practice has been criticized by members of the industry.

“Deshotel said his intent is to have businesses on an even playing field with respect to the bidding process for jobs, but supporters of the measure add that it could also crack down on the amount of employers who knowingly hire unauthorized workers.  Under Deshotel’s bill, an “independent contractor” can only be classified as such if the person is registered with the Texas secretary of state and has a filing number, or possesses a valid tax identification number.

“’Some people are interested in this because it’s socially wrong and it hurts people as individuals and their families and they don’t get paid right,’ Deshotel said.  ‘Other people are supportive because it gives unfair [advantages] to their business competitors” who can offer lower bids because they pay lower wages.’”

Texas Senate Business and Commerce Committee Chairman Senator John Carona, R-Dallas, has also taken a keen interest in this issue.  He's instructed his committee's staff to research this and bring stakeholders from around the state into the discussion.  We'll continue to track developments at the Texas Legislature.


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