A Sustainable Workforce Starts With You

How To Beat Competitors and Cheat Your Employees

This article by Patricia Kilday Hart originally appeared in the Houston Chronicle on 11/30/2012.  Reprinted with permission.

“Independent contractor” has a nice ring to it.  The title itself carries a certain cachet, as if the person claiming it is self-sufficient enough to shun ordinary employment, brave enough to go it alone.  The self-employed, after all, have only one boss to please.

But in reality, especially in the construction industry, the “independent contractor” label is a dodge.  It’s how some employers get away with skirting laws requiring them to pay a minimum hourly wage, payroll taxes and provide workers’ compensation coverage.  It’s how some businesses game the system to defeat competitors – and hose their employees in the process.

Now, the practice has become so pervasive that some business leaders want the Legislature to ban the “misclassification” of employees in public contracts.  Businesses that aren’t following employment laws shouldn’t get those lucrative government jobs, they reason.

They want a level playing field.  But it’s more than that.  According to Stan Marek, CEO of Houston-based Marek Brothers Construction, the issue has long-term implications for the Texas economy.  Until construction workers are paid an hourly wage with the protections offered by workers’ compensation and other benefits, young Texans will continue to shun what used to be an honorable field.

“We will never attract young men and women into the construction industry until there is a career path,” Marek declared.

The unfair labor practices are relegating what used to be good jobs to “a tremendous underground economy,” Marek noted.

“There’s a tremendous need for skilled workers.  A lot of kids don’t want to go to college,” he added.  But if the construction industry is dominated by businesses that exploit workers, Texas kids aren’t going to sign up.

As Marek told the Texas Workforce Commission at a recent hearing, “It’s a cancer that is eating at the heart of our industry.  It is killing us.”

Marek’s arguments found a receptive audience.  Workforce Commissioner Tom Pauken voiced his support for legislation that would require companies bidding on state contracts to prove all workers are being paid hourly wages, are covered by workers’ comp and are paying payroll taxes.

“There are a whole bunch of areas where subs low-bid something because they are not following the law,” Pauken said.  What he sees as “unfair competition” shouldn’t exist in contracts with the state.

Sen. John Carona, R-Dallas, chairman of the Senate’s Business and Commerce Committee, is considering legislation to deal with the problem.

Said spokesman Steven Polunsky: “The senator has been contacted by people who are in business and following the rules, and they are having to compete with people who are cutting corners.”  They trim labor costs by skirting payroll taxes and not providing workers’ compensation insurance, which protects laborers injured on the job.

Polunsky said one businessman told Carona, “I have to compete every day with companies that bid half of what I bid on homes and buildings because they are operating illegally.”

Polunsky said Carona agrees that a problem exists, but “the solution is not yet apparent to us.  That’s one of the things we are going to be working on this session.”

Let’s face it: The subtext of this column is that illegal immigrants will accept employment, even if the conditions are exploitative.  Employers have a ready supply of laborers willing to forego an hourly wage and work – misclassified – as a “subcontractor.”

Right now, Texas taxpayers are both burdened by and benefiting from the “subcontractor” ruse.  We benefit in the form of cheaper construction in everything from highways to schools.  At the same time, we’re burdened when uninsured injured workers show up at the local emergency room after an accident.

That “cheap” labor we love so much carries hidden costs.  For starters, we all pay higher insurance premiums when hospitals care for the uninsured.

At long last, our leaders in Washington, D.C., are beginning to sound serious about immigration reform.  The effort in Texas to enforce fair labor practices may also have an impact on the issue by reducing the demand for “subcontractors.”

And forcing employers to compete fairly will create jobs that young Texans want to fill.

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