The University of Texas study on the construction industry that we've been telling you about is getting attention across the state, from TV reports in Austin and Dallas to a column in the Houston Chronicle.  

In a piece called "Why construction fails as a good career choice," L.M. Sixel cited the UT study when she wrote: 

This "race to the bottom" is making it difficult for business owners that follow the rules to compete, according to the study, "Build a Better Texas: Construction Working Conditions in the Lone Star State." Researchers interviewed 1,194 construction workers as well as 15 industry leaders. Read more » about Houston Chronicle Highlights "Race to the Bottom" in Construction Industry

Misclassifying Workers as Independent Contractors

We have written numerous times about how widespread this issue has become in the construction industry, and now we see a new lawsuit filed by FedEx Ground that uses one of the oldest arguments we’ve heard: “It ain’t my problem! All of our folks are independent contractors. They hire their own workers and deliver for everyone and we have no control over them or what hours they drive. So, General Abbott, we don’t owe the Texas Workforce Commission any workers' comp fees.”

Legitimate? We don’t know yet. The courts will decide. What we do know is that when we hear that comment on the construction site we call it a “sub – sub” problem and usually the workers come up on the short end of that stick. On the construction site, the GC hires a sub that hires another sub to do the work and claims Independent Contractor and avoids FUTA, SUTA and any other taxes.  Read more » about FedEx Sues Texas Workforce Commission

Lawmakers who are still gearing up for the real business of the 83rd Texas Legislature got an earful from construction executives from around the state on TCA’s lobby day. The Texas Construction Association’s members have several legislative priorities, including a fair solution to the problem of misclassification or payroll fraud.

Raymond Risk, CEO of the group, told Construction Citizen that they hope the legislature will address misclassification in a balanced way. He and others are encouraged by the fact that the Texas Workforce Commission voted to support legislation that would impose fines on payroll fraud committed on government contracts. There are some within the industry who think any new law should be broader than that. There are others who want to see no new regulations passed whatsoever.

Risk said many TCA members have complained that they’re being significantly underbid by unscrupulous companies that essentially pretend their employees are subcontractors – something they do intentionally to avoid payroll taxes. He pointed to the UT research unveiled last week that shows more than 40% of construction workers in Texas are misclassified. 

“Those that don’t properly classify their workers are at a large advantage when they’re bidding if they don’t have to pay taxes for the people on their project,” Risk said. “We want to encourage them to comply with the law and maybe they need a little more stimulus to get them to do so.” Read more » about TCA: Our Lobby Day Was A Success

An article in the Stamford Advocate reported that state and federal Department of Labor Officials and OSHA representatives assisted by local police cracked down on four major construction sites in the Stamford area on Wednesday, January 23.

The police were called into the activity to keep workers from leaving the sites until they were interviewed.  In the past, such raids resulted in little results as workers drifted off site or were transported to other sites to avoid the interviews.

According to the article, over 180 workers were interviewed during the sweep which was targeted at companies who are suspected of payroll fraud.  While the final findings have not yet been released, it was found that one subcontractor company with a crew working on a 227-unit apartment project, Heritage Sheetrock, had not paid 10 of their workers for 3 weeks. Read more » about Payroll Fraud Crackdown in Stamford Connecticut

We reported last October that the cost of Drywall was due for another spike this year. That one is coming on top of a large spike in 2012 in the middle of one of the largest recessions in our careers.  We wondered how the Drywall industry would respond and now we know.

According to Top Class Actions.com, “An Arizona-based drywall company has filed a class action antitrust lawsuit against nine major drywall manufacturers accusing them of conspiring to fix and raise the prices for gypsum board, also called drywall or sheetrock. The defendants collectively control 99 percent of the gypsum board sold in the United States and Canada, according to the class action lawsuit.

“Sierra Drywall Systems Inc. alleges in the drywall price-fixing class action lawsuit that Georgia-Pacific LLC, American Gypsum Company LLC and seven other defendants forced consumers to pay inflated drywall prices starting in January 2012 with a large, coordinated price hike.  The price-hike also included new restrictions on the supply of gypsum board made available to distributors.” Read more » about USG and Other Drywall Makers Accused of Price Fixing

Researchers at the University of Texas back up what we've been saying at Construction Citizen for years: far too many construction workers in Texas are the victims of payroll fraud.

They released a study this morning in Austin called “Build a Better Texas”.

Download the 74-page report: Build a Better Texas.

Among the study's findings:

• Wage theft results in lost tax revenue: at least $117 million in lost wages and $8.8 million in lost sales tax revenue impact cash-strapped state and local governments.
• Texas construction workers are forced to fall back on public safety nets to support their families. Low wages and wage theft contribute to economic instability for construction workers and their families. Fifty-two percent of Texas construction workers report that they were unable to meet the basic needs of their family at some point.

  Read more » about UT Research: Over 40% of TX Construction Workers are Misclassified

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. Read more » about Looming Texas Payroll Fraud Crackdown Gets National Attention

While the Texas Legislature prepares to wade into the debate over the best way to deal with payroll fraud, some leaders at the local level say they're not waiting for Austin to take action.

Doug Miller, a city councilman in the Fort Worth suburb of Keller says he's going to be in Austin quite a lot during this legislative session a bit to ask that lawmakers “do the right thing.”

Miller, who is also a vice president of a construction company in Fort Worth, wrote on his blog “I have expressed my support for a bill that will deal with this situation with my state representatives.  I have also looked into having an ordinance in place in Keller that requires contractors that work for the city not have illegitimate contractors, and in the coming year, if this legislation doesn’t pass, I will push something through on the local level.”

Miller said his plaster, masonry, and stucco firm, Bobby Lee and Company, has been underbid by cheaters by as much as 35 percent.

In an interview with Construction Citizen, Miller said his main concern about the legislature is that “they won't do enough”.  He said the Texas Workforce Commission, which has endorsed legislation, needs to go back to the way it used to operate: audit companies for misclassification and penalize them by levying fines.  Twenty years ago, Miller's company was fined for misclassifcation.  “That stopped that for us.  We learned our lesson,” Miller said.  Read more » about Some Won't Wait for Texas to Take Action on Payroll Fraud

During the debate and political wrangling over the Fiscal Cliff throughout the New Year’s holiday, Congress, on New Year’s day, passed HR 4212, the Drywall Safety Act of 2012, and sent it to the President for signature.

Unless you were looking for it or following it, you probably missed it.  It is a bill aimed at preventing a repeat of the importation of high-sulfur drywall from any source, but specifically from China, that over time causes corrosion and deterioration of piping and wiring in the facilities where it is installed.

The bill instructs the Secretary of Commerce to contact the Chinese government that owns a major part of the industry in China, and to instruct them that any future drywall that is supplied to the United States be in compliance with the labeling and sulfur content spelled out in ASTM C1264-11.

An additional provision of the act is “Remediation Guidance for Homes with Corrosion from Problem Drywall” Read more » about Chinese Drywall Bill Passes Congress

Construction industry leaders in North Texas have started the process of figuring out what kind of payroll fraud crackdown they could possibly support.

Members of the Government Affairs Committee of TEXO in Dallas/Fort Worth met to talk about their legislative priorities on Monday and by all accounts they had a lively discussion about the issue of worker misclassification.  Comprised of members from throughout North Texas, TEXO is one of the largest construction industry trade associations in the state.

Jack Baxley, TEXO Vice President of Government Affairs, told me members of the group are still mulling their options and they'll hopefully have recommendations ready by the end of the month.  “This isn't something that just popped up today,” he said while noting that TEXO wants to make sure that any legislation passed is good for the industry. Read more » about North Texas Industry Leaders Mull Over Options on Payroll Fraud