Update on Misclassification in Texas Construction

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On July 13, Construction Citizen shared a story first reported by Dallas/Fort Worth television station WFAA about misclassification of workers on a school construction project.  Last week, the same WFAA reporter submitted an update to the story.

The original story featured a subcontractor who lost the bid for work on Mansfield Independent School District’s Center for the Performing Arts to a competitor who does not pay payroll taxes, unemployment tax, or workers’ compensation insurance.  Following the investigation and airing of the story, the Texas Workforce Commission (TWC) charged Mireles, the subcontractor who was hired for the project but did not pay those taxes, for $6,924.93 in unpaid unemployment taxes and penalties.  According to the news report, the TWC has a “new aggressive approach” which is affecting much of the construction trade in Texas:

“Records show the Texas Workforce Commission has increased enforcement of unpaid payroll tax by an astounding 500 percent, year-to-year.  It's a complete leveling of the playing field.”

The TWC reports all unpaid state unemployment taxes to the Internal Revenue Service.  Based on the state taxes Mireles was found to owe, the IRS may discover that he owes an estimated $161,000 in federal payroll taxes.

Now responsible contractors such as Anderson have a better chance of winning bids and getting work, which means they are able to retain more employees.  In Anderson’s case, the results are palpable.  After being forced to reduce his employees down to 20 from 60, Anderson now reports:

“It has since come back.  I got 60 guys working for me now, and for sure I need 200 more guys in the next eight weeks.”

This is encouraging for all responsible employers who continue to pay their workers and their taxes, and should put those who do not on notice.

You can watch a video of the newscast below, or read the transcript of their report on their website.

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