Florida legislators have made a bold move in the battle against payroll fraud with the passing of Florida House Bill 217 titled “Money Services Businesses”.  Aimed directly at the bandits who run check cashing stores to enable dishonest contractors to avoid paying workers’ compensation and payroll taxes, the bill is now on its way to Governor Rick Scott for his signature into law.  The details of the bill were explained in a press release from the Florida Office of Financial Regulation (OFR).

“The new legislation will require check cashers to log any checks cashed in excess of $1,000.  In addition to the check amount, each business will be required to submit traceable information such as payor, payee, fee charged, type of identification presented and payee’s workers’ compensation insurance policy number, if the check was made out to a business.  The bill also provides that multiple checks accepted from any one person in one day, which total $1,000 or more, must be aggregated and reported in the database.”

Readers of Construction Citizen have already been informed about how these check cashing store / workers’ comp fraud schemes work, but here it is again.  A dishonest contractor will submit a bid for a job using a company name which lists only a few employees – just enough to obtain a small workers’ compensation policy.  The contractor will then take checks paid to that company by the general contractor to a check cashing store to cash them so that most of the workers can be paid in cash.  Read more » about Check Cashing Payroll Fraud Scheme Thwarted in Florida

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 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. Read more » about Carona To Lay Out Payroll Fraud Bill Next Week