Jason Fincke, Executive Director
Builders Guild of Western Pennsylvania, Inc.
We are living in some unusual and difficult times. The popularity of fiscal conservatism is overwhelming and the fallout from such a principle can be devastating, if not catastrophic, for many people. The anti-tax sentiment that has birthed the tea party and given increased national prominence for individuals such as Sarah Palin and Michele Bachmann has evolved into in anti-union, anti-public worker, where the only good employee is one paid less than whatever it is the tea partier is earning.
Paying less, buying cheaper is becoming a mantra and it doesn't bode well for union building trades workers or responsible contractors where the bottom line, however attained, often determines who gets the job. For some "contractors," that means finding ways to misclassify workers as independent contractors or hiring an unskilled, migratory workforce who may or may not be U.S. citizens, but are willing to work at substandard wages and benefits.
It's been a problem for many years throughout the country and it's undoubtedly happening right here in western Pennsylvania. That's one reason House Bill 44, known as the "Contractor Work Place Misclassification Act" was signed into law this past fall. With proper enforcement, no longer can contractors misclassify workers as independent contractors in order to avoid paying payroll taxes, workers compensation insurance costs and unemployment compensation expenses. While penalties are not particularly steep, violators are also subject to stop work orders and other sanctions.
If nothing else, the Act is good first step, but the key to its success starts with enforcement and that will begin with everyone reporting known and suspected violations to the proper authorities, particularly the District Attorney's Office. That means not looking the other way and waiting for someone else to speak up.
It's that type of apathy which has cost this country untold millions of dollars in uncollected tax revenues from irresponsible and unscrupulous contractors. It's also the kind of attitude that prevents responsible contractors from bidding work on a level playing field, allowing non-union contractors to literally steal work. The problem is not new, but it may be increasing.
For example, in a recent Construction Labor Report, it was reported that:
||In December 2007, the Fiscal Policy Institute released a study on illegal employment practices in the New York City construction market that found that 50,000 of 200,000 construction employees were either misclassified or paid off the books, resulting in an estimated one year loss of $557 million in federal, state, and local taxes, workers compensation premiums, and health care cost shifting for injured workers.
||Researchers from Michigan State University found that up to 30 percent of employers in Michigan underreported $1.5 billion of payroll by misclassifying employees or paying them off the books, including 26 percent of construction employers, 24 percent of trucking employers, and 56 percent of security-guard firms. The accumulated estimated losses were $129 million to $203 million in state and federal taxes.
||A 2010 Tennessee study found up to 38,680 construction workers, or 21 percent of the construction workforce, were misclassified as independent contractors or paid unreported wages in 2006. The losses were up to $14 million to the state’s now-beleaguered unemployment trust fund, $91.6 million in workers’ compensation premiums, and $115.4 million in federal income and employment taxes.
Misclassification is a serious local, state and national problem, and as competition for fewer publicly funded jobs becomes more intense, the incentive for unscrupulous contractors to “beat” the system will undoubtedly intensify. That’s why so many states such as Pennsylvania have passed laws aimed at cracking down on misclassification.
If you are looking for a contractor, make sure they know and follow the law regarding the misclassification of workers. There are many highly professional and responsible contractors who aren’t afraid of competition, but the playing field must be level.
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