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When the private sector does not address a major issue, the public sector will often step into the vacuum and do it. The construction industry has been slow to embrace the principles of social responsibility and sustainable value, focusing instead on whatever it takes to be lowest bidder. As a consequence of this, government is adopting policies that reshape the rules for the industry.

After months of forward momentum, a proposed crackdown on misclassification of construction workers championed by both business and labor may have hit a serious snag.

The bill by Representative John Davis, R-Houston, would create penalties for companies that are found to be intentionally misclassifying their workers. Despite the fact that it was passed unanimously by a committee, it has yet to be placed on the calendar for a vote by the full House of Representatives. Our sources in the capitol say members of the powerful House Calendars Committee are under pressure from home builders who testified against it to keep the bill off the House floor. Make no mistake: It is crunch time for passing bills in this legislative session. Read more » about Misclassification Crackdown Stalls in Texas House

Recently, the United States Judicial Panel on Multidistrict Litigation centralized the six current class action suits to the Eastern District of Pennsylvania for further adjudication.

According to the panel of Judges, “On the basis of the papers filed and the hearing session held, we find that these actions involve common questions of fact, and that centralization under Section 1407 in the Eastern District of Pennsylvania will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.”

The suits arose after the defendants, USG Corporation; United States Gypsum Company; L&W Supply Corporation; New NGC. Inc.; Spangler Companies, Inc.; CertainTeed Corporation; Georgia-Pacific LLC;  American GypsumCompany LLC; LaFargeNorthAmerica, Inc.; TIN, Inc. d/b/a Temple Inland, Inc.; and PABCO Building Products LLC. Read more » about Domestic Drywall Price Fixing Class Action Suit Update

A fight between some construction companies and Texas bankers may have to wait until the next legislative session to be resolved. That was the tone of a hearing this week in the Texas Senate where bankers made the case that even though it sounds like a simple concept, it is a tough issue when you “get into the weeds” of it.

Construction trade groups, chiefly the Texas Construction Association, support a bill by Senator Bob Deuell, R-Greenville, which would require lenders to give notice when funding is being pulled from a project. Deuell said that he felt all the stakeholders had negotiated in good faith to try to craft legislation that solves the problem. Testimony was offered Tuesday morning to the effect that when a lender decides there will be no more disbursement of funds on a project, they are not required to notify any of the companies doing the work. Sometimes weeks or months go by before the construction companies on a project realize they are not going to be paid for that work.

Rich Thomas, a construction lawyer in Dallas, testified before the Senate Business and Commerce Committee stating, "The problem is in the rare situation whenever there's a default.” He said in the event a lender makes the decision to stop funding a project, construction companies get the short end of the stick. "When the lender does not tell the general contractor, that's wrong," he said. Read more » about Senate Committee Hears Lender Notice Bill

The bill still has a long way to go, but the proposed crackdown on the intentional misclassification of construction workers in Texas passed a milestone last week when it was voted unanimously out of a House Committee.

On a 7-0 vote, HB 1925 was sent to the full Texas House. Before it can get to the House floor for a vote, however, it has to be put on the House calendar by the Calendars Committee. This is a step in the process where many bills can die. With time running short in the legislative session, the Calendars Committee has the power to keep legislation, good or bad, from getting to the point where the representatives of the people get to decide the issue. I'm told that Calendars Committee Chairman Todd Hunter may be coming under pressure from opponents of the crackdown, including the largest homebuilders: Read more » about Worker Misclassification Crackdown Passes House Committee

A federal grand jury in Kansas City, Kansas has charged a construction company, its owners, and four of its crew leaders with harboring illegal aliens and money laundering, charges which could bring the defendants up to 20 years in federal prison each and fines up to $250,000 per convicted count.  Advantage Framing Systems, Inc. of Spring Hill, Kansas, company owners James and Kimberly Humbert and Charles Stevens II, and four framing crew leaders for the company – Jose Ramon Caro-Corral, Angel Arguello-Plata, Dennis Ericson Portillo and Jorge Uriel Delgado-Ovalle are all charged with committing these crimes as part of a scheme to hire illegal workers in order to gain a competitive advantage over other contractors and boost their own profits.

A press release by the United States Attorney’s Office for the District of Kansas explained how the company allegedly conducted business:

“The indictment alleges James Humbert, Kimberly Humbert, Charles Stevens and the company itself were responsible for hiring undocumented workers for the purpose of lowering the company’s operating costs.  The wages the company paid did not include the employer’s share of Social Security payments, workers compensation, or unemployment insurance benefits paid to lawfully employed workers in the construction industry.  They placed themselves at a competitive advantage to other builders who did not employ undocumented workers. Read more » about Framing Company Charged with Hiring Illegal Aliens To Cut Costs

Major Texas homebuilders came out against the state's moves toward cracking down on worker misclassification during a legislative hearing on Wednesday. The Leading Builders of America, which represents Perry Homes, David Weekley Homes, and others, argued that putting new regulations in place for the industry would lead to higher home prices and stifle job creation.

Steve Henry, speaking for the Leading Builders of America, the trade group that represents Perry and Weekley, said the crackdown on payroll fraud would not only lead to increased home prices, but it would also increase litigation, deter the creation of small businesses and stifle job creation. Andrew Turner, representing the same trade group, said it is a "confusion of an already confusing area of the law." He said the Workforce Commission already has the ability to deal with misclassification. “It’s not fair to single out this industry,” he said. He said that if the legislation were passed, more people would have to be paid as employees instead of independent subcontractors. Read more » about Sparks Fly at the Capitol Over Misclassification Crackdown

Construction Citizen Weekly Update
Listen to Scott Braddock's highlight of the latest news and information from ConstructionCitizen.com.

Construction industry leaders, associations, labor unions and others testified before lawmakers in Austin on Wednesday that the state needs to aggressively go after companies that misclassify their employees to avoid paying payroll taxes.

The bill was laid out and the latest version does the following:

  • Leaves the current common law test definition in place for independent contractor.
  • Imposes a penalty of $100 for those in construction that misclassify their worker for the first time.
  • Imposes up to a $1,000 penalty per employee, for each subsequent violation (this amount will be determined by the Texas Workforce Commission on a case-by-case basis).
  • Allows an employer to appeal a violation and get the violation removed or get the penalty reduced based on certain criteria.

Read more » about Business and Labor Come Together in Worker Misclassification Hearing

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