The state of Utah is fighting worker misclassification in the construction industry by scrutinizing employment records of companies who hire limited liability corporations, or LLCs. Some dishonest contractors avoid paying their workers as employees by having each of them register as separate LLCs, claiming on paper at least that each worker is a company owner or independent contractor.
Two years ago the state legislature created an enforcement council consisting of representatives from the state’s Labor Commission, Department of Commerce, Tax Commission, Department of Workforce Services and the Utah attorney general. The council meets monthly to share information about construction companies in order to identify and stop worker misclassification, or payroll fraud. The 2013 legislature has now authorized the continuation of the Worker Classification Coordinated Enforcement Council for the next three years.
The Utah Division of Occupational and Professional Licensing (DOPL) is in charge of enforcing state licensing rules for construction companies. This week, an article in the Salt Lake Tribune explained how these rules provide one way for contractors who commit payroll fraud to be caught. The article states:
“Changes in 2011 tightened definitions of employees and owners for licensed construction companies, set new reporting rules and provided for state auditing to verify financial responsibility. Licensing disclosure rules give officials a crucial glimpse into how companies operate, as well as a squeeze point when their practices are out of bounds.”
The article quotes Alan Hennebold, Deputy Commissioner of the Utah Labor Commission and Chair of the enforcement council, as saying:
“Money is one thing, but the fundamental fairness at stake is even more important. You can’t have a system where people who play by the rules are suckers and are at an economic disadvantage at the hands of people who don’t follow the rules.”
The DOPL has another tool which may also shed light on which contractors are aboveboard and playing by the rules. According to their website, the State Construction Registry (SCR) “is an online ‘bulletin board’ providing full disclosure to property owners, contractors, and other interested parties, of people providing goods and services to a construction project. By providing a centralized resource for project participant information, the SCR helps property owners minimize unknown project liability and risk.” Their 4½ minute video below explains how the registry helps owners avoid having any liens placed against their property due to a subcontractor’s failure to pay someone they owe.
While this “comprehensive list of who is working on each construction project in Utah” may also prove to be useful to state prosecutors looking to crack down on payroll fraud, the corrupt practice continues. As long as they can get away with it, dishonest bandits will continue to cheat their employees, their competitors, and ultimately the taxpayers. In the comments section on YouTube under the SCR video, one individual wrote:
“I am a general contractor in utah. To avoid creditors and homeowners I keep changing my company name. DOPL finally caught up with me and revoked my license. I am still in business, I just opperate under ANOTHER name and license.”
The time has come for conscientious citizens to work with legislators, business owners, and community groups to face the problem of payroll fraud and refuse to put up with this practice that has been the “normal” way of doing business for far too long. What do you think?
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