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.

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

This article by Representative Armando Walle, D-Houston originally appeared in the Houston Chronicle on April 1, 2013.  Reprinted with permission.

In recent years, attention has been drawn to the dangers and injustices faced by construction workers in Texas where business is booming and construction levels have rebounded to near pre-recession levels. Texas construction workers and their families are often set up for failure, dealing with dangerous work sites, poor wages, bad training and labor rights violations.

The sad fact is that Texas still leads the country in the rate of construction worker fatalities. This is unacceptable. Federal regulations from the Occupational Safety and Health Administration provide some protections, but as a state we must make improvements to ensure safety at work sites, including adequate health and safety training and proper safety equipment for employees.

The role of workers' compensation is also particularly important for these construction workers. Workers' compensation provides a means for injured workers to pay medical bills resulting from workplace injuries and make up for lost income until they return to full employment. Workers' compensation also serves the families of workers killed on the job, providing a portion of the lost wages to surviving family members.

Read more » about Texas is No. 1 in a Grim Statistic

Following at least a month of weekly stakeholders meetings, Senator John Carona is set to lay out his vision for dealing with worker misclassification in a Texas Senate committee next Tuesday.

The Dallas Republican's Senate Bill 676 is the result of balancing the need to fix the problem against the concerns of some players within the construction industry who don't want to the bill to go too far. The sticking points have included whether the state should create its own definition for subcontractor – rather than just stick with the IRS definition – and whether the specific amount for penalties should be written into the statute or set by the Workforce Commission on a case-by-case basis. The Texas Association of Business would prefer the latter option.

In the Texas House on Wednesday, Representative John Davis presented to the Economic & Small Business Development Committee his bill on this issue.   Read more » about Carona To Lay Out Payroll Fraud Bill Next Week

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.” Read more » about Not An Employee, LLC

A fight is brewing in Austin between bankers and the construction industry. The Texas Construction Association and the Associated General Contractors Texas Building Branch are pushing lawmakers at the state capitol to require that lenders notify construction firms when a decision is made to discontinue funding for a project.

Some projects get their funding pulled in the middle of building, and in some cases, the construction firms are essentially hung out to dry. In the event a bank decides it will stop the flow of money to a project, that same bank can also later foreclose on the project.  "When they foreclose on the project, they wipe out any of our liens," TCA President and CEO Raymond Risk said. "They've gotten all this work done by us."

Two bills have been filed to address the issue:

Risk said some TCA members have been hurt significantly when this happened. Read more » about Construction Firms Seek Notification When Funding is Pulled from Projects

Construction companies that get any government contracts in Texas may soon face penalties if they don't do a certain amount of safety training. Senator Bob Deuell, a Republican physician from Greenville, said his bill, SB 167, makes business sense as well as offers protections for workers.

"Other states and other places where they do that kind of training - they just cut down on their injuries. I don't think it's too cumbersome on businesses. An ounce of prevention is worth a pound of cure," he said. "The business community, I think, supports it. It costs them a lot more to deal with injuries than it costs to pay for training. There will be some people who don't like it but the data is there. If I were running a business I would just be doing it anyway."

20 years ago, Senator Deuell helped shape a worker safety training plan for the Rubbermaid plant in Greenville, Texas. He said it was good for the workers and the company's bottom line. "Their workers' compensation claims just went down really, really low," he said. Read more » about Worker Safety Training Could be Required for Government Contracts in Texas

During September of 2010, Governor Arnold Schwarzenegger killed two bills aimed at penalizing employers who commit wage theft in California.  However, he failed to win reelection, and after Governor Jerry Brown took over the post the following January, Brown went on to sign Assembly Bill 469, known as the Wage Theft Protection Act of 2011.

California’s Wage Theft Protection Act (WTPA) has been in effect since January 2012.  It added Section 2810.5 to the labor code which requires employers to provide new employees with specific information in writing at the time they are hired, including the legal name and address of the company who is hiring the new employee, the name and address of the company for whom the employee will perform work, the employee’s rate of pay, and the basis of wage payment Read more » about How To Comply With California Wage Theft Law

There's still plenty of work to do, but supporters of a crackdown on payroll fraud in Texas got a big boost yesterday when the Texas Association of Business (TAB) said it would not oppose the effort. Cathy DeWitt with TAB said in a House hearing that the powerful business group agrees with the concept, but they have some problems with the bill filed by Representative Joe Deshotel, D-Beaumont.

Among other things, DeWitt said the amount of fines for payroll fraud shouldn't be written into a new law, but instead the Texas Workforce Commission (TWC) should use its rulemaking process and take complaints on a case-by-case basis. 

I spoke with Representative Deshotel after the hearing and he said he has a lot of work to do when it comes to coordinating with the TWC on this issue. "I will keep visiting with them. We have to deal with what we have. I've been working with TAB and you know the other people who testified, and I think it's an enforcement issue Read more » about Texas House Holds First Hearing on Payroll Fraud