Now that the dust has settled from the regular session of the Texas legislature, there is some good news to report on the issue of worker misclassification. The broad crackdown on the practice that's been called "a cancer" didn't materialize, but an important first step was taken.
As Construction Citizen has reported, and garnered national attention for, the largest home builders fought tooth and nail to keep a comprehensive worker misclassification crackdown from happening. That bill pushed by Sen. John Carona, R-Dallas, would have aggressively gone after companies that misclassify their workers with a special focus on construction. But, the large home builders did not get involved with a smaller bill that we at Construction Citizen see as a start toward meaningful reform. House Bill 2015 was signed by Gov. Rick Perry last month and would establish penalties for those who misclassify workers when they're doing government work.
From our friends at the Texas Construction Association:
"This legislation amends the Texas Labor Code to require that employers awarded a contract for public works must ensure that any individual performing services under the contract are properly classified as an employee or independent contractor. The bill also requires a subcontractor employer under that contract for public work to classify properly an individual as an employee or independent contractor. An employer who misclassifies is subject to a $200 fine for each individual misclassified."
Plans are being put together now for implementation of this policy. Former Workforce Commissioner Tom Pauken - now a candidate for governor - has long argued that this is a chance to move in the right direction and would be politically palatable in the legislature. Pauken and his former colleagues on the Workforce Commission voted unanimously at the end of last year to support a crackdown of this type.
Look, we already know that payroll fraud, as it's sometimes called, is a huge problem in Texas. The Build a Better Texas survey done by researchers at UT Austin showed that more than 40% of construction workers are misclassified. Implementation of penalties for doing it on government work will shed light on whether the state can get serious about dealing with the issue. After all, one of the rallying points for ethical construction companies is the story of Andy Anderson, the owner of Linden Steel, who was underbid on a government job in North Texas by someone who admitted he paid no taxes on his labor. That kind of thing is rampant and has to stop. The Construction Citizen team plans to hold the Workforce Commission's feet to the fire to ensure they're doing their job.