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North Texas Industry Leaders To Weigh In on Payroll Fraud

Key players in the construction industry in North Texas today are expected to decide whether they'll support efforts to crack down on the intentional misclassification of construction workers across the state.

Members of the Government Affairs Committee of TEXO, the large trade association for builders in the Dallas/Fort Worth region, are meeting Monday to talk about whether they'll take a formal stand against misclassification, also known as payroll fraud, and support legislation to deal with it.  The Texas Workforce Commission has endorsed the idea of rooting out payroll fraud on government contracts.  Lawmakers could decide to do even more than that, depending on what happens during the Texas Legislature's regular session starting this month.  Senator John Carona, R-Dallas, has told his staff at the Business and Commerce Committee to start the process of drafting legislation.  Carona chairs that powerful committee.

In reporting on this story, I reached out to about a dozen members of TEXO to find out where they might come down on this.  Most of the companies I contacted either didn't respond or said they would rather work through TEXO to address their concerns.  Those that did respond were very positive about working to craft legislation that cleans up the industry while remaining sensitive to concerns that increased government regulation is bad for business.

“I strongly support legislation to deal with the misclassification of workers (employees),” said Steve Baker, CEO of Baker Triangle Plaster and Drywall. “It not only is a loss of taxes for the government but it is a huge workers’ rights issue – so many of the companies that pay their ‘employees’ (independent contractors) cash also abuse them on safety, workers’ compensation and overtime laws.  I estimate that at least 25% of the commercial construction market operates in the black market.  Now with a mandate to cover employees’ health care in 2014, the tax cheaters will have a greater advantage when bidding public construction projects.”

Baker pointed out that most states have license requirements that get companies plugged-in to state and federal laws.  However, Texas has no license requirements for contractors, so it is much easier for contractors to cheat and label their employees as “independent contractors” – paying them cash, getting around overtime laws, withholding, unemployment taxes, social security and now health care, he said.

John Bosworth, President and CEO of Bosworth Steel Erectors in Dallas said “Our company will absolutely support Senator Carona and his efforts.  As a member of the TEXO board we will work toward a comprehensive bill to stop this practice.  It is time to stop the cheaters and level the playing field for the construction industry.”

After the Government Affairs Committee of TEXO makes its recommendation, the full TEXO board will use that to decide how the trade association will approach the issue during the legislative session.

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