Labor brokers are putting workers at risk to avoid paying insurance premiums
By Alejandro Ramirez
Feb 12, 2020
A new report from the Tennessee Bureau of Workers’ Compensation Compliance Program highlights how construction companies and subcontractors are misclassifying workers to avoid paying workers’ compensation. The report details several other practices rampant in the construction industry that deny protections to workers and give noncompliant businesses a financial edge when it comes to securing contracts.
These practices put workers at risk. If workers are injured on the job, for instance, there’s a chance their employers won’t compensate them because they’re listed as independent contractors rather than as employees. Noncompliance also costs the state tax dollars, though the amount of dollars owed is difficult to pin down, especially when employers try to hide information from assessors.
“It’s sort of like an iceberg,” says Amanda Terry, the bureau’s director of compliance. “What we believe that we’re seeing is only 10 percent – the part that’s above the surface.”
The state collects 4.4 percent on workers’ compensation premiums, and the report says that in 2016, insurance carriers may have lost as much as $296 million.
The report says many employers also hire workers through subcontractors known as labor brokers, which frequently misclassify employees. Contractors hire these brokers, who in turn provide workers for a construction site. Many of these brokers have also been accused of wage theft and other compliance issues.
“We find that … when an employer is doing the wrong thing with their workers’ comp, they’re generally doing the wrong thing across the board,” says Terry.
These practices give labor brokers an unfair advantage. Victor White, director at Mid-South Carpenters Regional Council, a union representing carpenters, tells the Scene that a law-abiding contractor “walks in the door at a 20 percent disadvantage” compared to noncompliant businesses when it comes to bidding on contracts.