Indiana seeks study to collect unpaid employment taxes (IN)

Posted by National Alliance for Fair Contracting on

By Craig Lyons
May 23, 2019, 3:00 PM

Indiana lawmakers plan to probe lost revenue when employees are listed as contractors or part-time by employers to avoid additional taxes.

A legislative study committee will look at worker misclassification and how to deal with potential lost revenue to the state. A study done by the Building Trades and Construction Council estimates the loss to the state from misclassification at $400 million, but a state-authored report posited the figure is closer to $14 million to $20 million for the state and $5 million to $7 million in local income tax revenue.

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The state says worker misclassification happens when employees are listed as independent contractors or part-time employees, which often leaves them without overtime pay, workers’ compensation and unemployment insurance.

“This is little more than payroll tax fraud committed by unscrupulous contractors who are trying to gain an unfair competitive advantage in the marketplace,” Beck said. “Payroll fraud affects every taxpayer, shrinking public budgets, and even health care costs. It is about regaining lost tax revenue and insurance fund premiums because of dishonest contractors.”

Two reports have studied worker classification, one by the Indiana Building Trades and Construction Council, and a second from the Indiana Department of Revenue and Workforce Development and the Workers’ Compensation Board.

“There are at least four state agencies in state government – the Indiana Department of Revenue, the Indiana Department of Labor, the Worker’s Compensation Board of Indiana, and the Department of Workforce Development – that have the ability to investigate and report on this subject matter,” Beck said. “What this study would do is direct these agencies to tell us how pervasive worker misclassification is in Indiana, and what we can do to combat it.”

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Opinion: Criminalizing wage theft is only one step in the right direction (CO)

Posted by National Alliance for Fair Contracting on

APR 29, 2019 4:05AM MDT
Rebecca Galemba

A day worked is a day paid,” a day laborer in Lakewood, Colorado stated. But according to the Colorado Fiscal Institute (CFI), this is not the case for many Colorado workers. Each year, half a million Coloradans suffer from wage theft, amounting to $750 million a year, in addition to the associated $25 million to $47 million in lost state tax revenue and potential public services.

Wage theft refers to the denial of earned wages and benefits protected under state and federal labor laws. The CFI numbers are likely vast under-estimates due to underreporting and pervasive worker misclassification.

New legislation, like Colorado House Bill 1267, would recognize wage theft for the insidious, and often intentional, crime it is. This legislation would treat wage theft as “theft” so that the intentional withholding of wages over $2,000 would be considered a felony.

When employers get away with cheating their workers, it not only harms Colorado’s most vulnerable people, but also undermines wages and working conditions for all workers and creates unfair business advantages for unscrupulous employers. When penalties are low or not applied, committing wage theft is relatively low-risk, profitable, and normal.

Recognizing the crime of wage theft is a step forward in mitigating this unfair business practice. House Bill 1267 can pave the way for more proactive policies to target routine violators, ramp up public enforcement, enhance retaliation protections, monitor industries with pervasive violations and create partnerships to assist workers who may lack the ability to come forward in a claims-driven enforcement environment.

In Colorado, the construction sector accounts for the largest share of violations of the Fair Labor Standards Act; it is estimated that a third of workers in construction may be misclassified, leading employers to avoid obligations to their workers as well as payroll taxes. In my research survey of over 400 day laborers, we found that 62% of workers surveyed had experienced wage theft, but that only half ever pursued their unpaid wages.

Fewer than 40% asked for assistance even though an amendment to the Colorado Wage Claims Act, which went into effect in 2015, authorized the Colorado Department of Labor and Employment’s Division of Labor Standards and Statistics to adjudicate wage claims and levy fines and penalties to deter bad behavior regardless of a worker’s legal status.

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