Worker Misclassification

Payroll fraud (also called worker misclassification and workplace fraud) is the illegal practice of designating an employee as a "1099 worker" or an independent contractor. Unscrupulous employers do this to avoid paying payroll taxes, unemployment tax, or workers’ compensation insurance and are therefore able to submit lower bids for projects, undercutting responsible contractors. Several states have already passed laws to penalize those who cheat workers and taxing agencies in this way, and two bills are currently being considered which would provide federal legislation to end this practice and that of wage theft. They are The Fair Playing Field Act, introduced by Senator Kerry and a number of co-sponsors and The Employee Misclassification Prevention Act.

A man in a wheelchair is protesting, with tape over his mouth.“If a piece of the building falls to the ground and breaks, they have insurance for that,” said a middle-aged man in a wheelchair in Houston. I sat in a small portable building behind a church, listening through an interpreter as the man, I’ll call him Miguel, told the story of how his spinal cord was injured when he fell on the job building homes along the Gulf Coast. “But, if I fall off a roof and I break, they don’t have insurance for me,” he said. I paused a moment before asking him any more questions, letting that sink in.

The Living Hope Wheelchair Association in Houston was founded to help men with these injuries who have no workers’ compensation. They’re under-funded, barely getting by thanks to the donations of churchgoers and caregivers. A small group of volunteers help these men and women with their most basic needs. And they know how to stretch a dollar. With meager donations, they’re able to buy things like catheters and diapers the injured workers need on a daily basis. As one volunteer showed me their supply, which he was proud of, I couldn't help but feel sorry for them. These are the kinds of things people would rather not have to talk about even if they have to use them. What struck me hardest is the fact that these people are hidden. People don’t talk about them because they've been used and abused. “A democracy can’t survive very long when it throws away its workers,” the volunteer said with an almost revolutionary tone in his voice. Read more » about A Special Report: Thrown Away People

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Yellow Hard HatAs experts and industry leaders get a look at the specifics of the federal immigration reform bill being pushed in the United States Senate, the devil is beginning to emerge from the details. A headline that got our attention here at Construction Citizen was this from the Engineering News Record, or ENR: “Construction Debates Cap for Hardhats.” The piece lays out the raw numbers of what's in the bill versus what the industry needs. And the numbers don't add up.

From the ENR report:

Since mid-April, when the Senate’s bipartisan “Gang of Eight” unveiled an immigration bill stuffed with compromises and trade-offs, the construction sector has focused on the “W” visa, a proposed guest-worker designation that would limit to 15,000 the number of immigrants allowed to work in construction each year. Read more » about Construction Industry Concerned About the Details of Immigration Reform

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While lawmakers in Texas this year took a pass on a broad crackdown on companies that misclassify their workers, other states are ramping up their efforts.

In Connecticut, for example, the state issued Stop Work orders to nearly 30 companies found to have been misclassifying their workers. The Connecticut Department of Labor says that they issued these Stop Work orders and slap penalties on companies that misclassify workers as independent subcontractors "with the intent of avoiding their obligations under federal and state employment laws covering such matters as workers' compensation, unemployment taxes and payroll reporting.

The civil penalty for misclassification in Connecticut is $300 per worker for each day the employer does not carry workers' compensation as required by state law.

While those numbers are significant, here's the real windfall from the state's efforts to deal Read more » about Connecticut Comes Down Hard on Companies That Misclassify Workers

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Construction in Texas may be "cheap," but that's only if you consider the final price of the project. In most cases, the true costs are borne by workers, taxpayers, and society at large. Case in point: WFAA's David Schecter, a quality journalist who exposed worker misclassification in a North Texas school district, this week took the time to highlight the story of Guillermo Mata.

From WFAA:

In December, Mata shattered his leg after falling from the second story onto a concrete floor at construction site in Irving.

"Take me to Parkland (hospital),” Mata recalls saying after the injury. Read more » about Taxpayers on the Hook for Injured Workers

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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

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On a commercial renovation job in Panama City, Florida, a Hispanic drywall construction worker was electrocuted when he came in contact with electrical wires projecting from a terminal box at the site where he was working.

According to an article published in the Durability + Design Journal, “A Florida contractor must answer federal citations involving the electrocution of a Hispanic drywall worker, although the worker was paid in cash and the contractor denied knowing him.”

In her statements to police at the scene, Nathalie Monroe, President of Monroe Drywall Construction, Inc. (MDC), denied hiring, or even knowing, the deceased worker. However, in subsequent testimony from other “drywallers” on the site, it was learned that MDC had hired the four men to hang, tape and finish the 338 boards on the remodel job and was paying them in cash. Monroe later admitted that she knew the deceased and had worked with him on other jobs.

This is a classic case where even though the workers were employees, they were paid in cash by the subcontractor in order to avoid workers' compensation claims and taxes. Read more » about Dead Worker Ruled an Employee in OSHA Ruling

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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

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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

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