OP-ED: CONSTRUCTION WORKERS MISCLASSIFIED AS CONTRACTORS – AN OUTRAGE (NJ)

Posted by National Alliance for Fair Contracting on

RICHARD E. TOLSON
MAY 7, 2019

‘Wealthy developers are taking advantage of labor laws and outdated regulation and enforcement to increase profit margins’

National civil rights and economic justice leaders gathered in New Brunswick late last week for the 2019 Summit for Civil Rights, and I was honored to join legendary leader Congressman Jim Clyburn on a panel at the event. It was privilege for New Jersey to host this event, but it was also ironic considering the injustices happening in our own backyard, and in plain sight.

It’s not often thought of as top-tier issue, but the gross, widespread and often crippling injustices imposed on working men and women in the construction industry in our state measure up as significant abuse and perpetuate structural inequality. While we purport to stand for fairness, all across our state, wealthy developers are taking advantage of labor laws and outdated regulation and enforcement to increase profit margins by abusing workers. And it has to stop.

These are millionaires utilizing middlemen to break state and federal laws by misclassifying full-time workers as contractors – denying them basic benefits and rights like healthcare, committing wage theft by paying below the required living wage, establishing illegal work weeks, paying cash and evading taxes – all to increase already record profits from rents and property sales.

A 2016 Stockton University report conservatively estimated that the developers are stealing more than $25 million in state tax revenue annually via these illegal tactics. But far worse, this theft involves approximately 35,000 workers who are off the books or illegally misclassified as independent contractors. An entire underground economy has been allowed to fester, all built on the abuse of workers, for the benefit of multimillionaires.

Not exactly a high-water mark for civil rights, huh?

(Read Me)

UBC: $2.6B in taxes lost yearly to under-the-table pay

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Author: Kim Slowey
Published: March 19, 2019

The United Brotherhood of Carpenters (UBC) has levied a serious charge against the U.S. construction industry – that it is shorting the American taxpayer to the tune of up to $2.6 billion each year by making under-the-table payments to more than a million workers. In Texas alone, the losses reportedly top $1 billion.

Prevailing wage proponents and research group Smart Cities Prevail provided the estimates to the UBC.

The UBC adds to that figure about 300,000 independent contractors that the organization maintains are really misclassified employees, forced to work as independents so that employers don’t have to pay them benefits, cover them with workers’ compensation insurance or make federal and state tax payments on their behalf.

“That’s shocking,” said Frank Spencer, UBC general vice president. “Think about it: The number of construction workers forced to work off-the-books is about four times greater than the number of misclassified workers. There’s no mistaking the blatant tax fraud.”

Small, legitimate independent contractors, however, do have a place in the industry, providing critical services and often supplementing the construction industry labor pool, a sentiment echoed by Kristen Swearingen, the Associated Builders and Contractors’ vice president of legislative and political affairs.

“Independent contractors are an important part of the construction industry, and ABC supports efforts to provide a clear, concise and reasonable definition thereof,” Swearingen told Construction Dive. “Any independent contractor reform effort must recognize that independent contractors are necessary, productive participants in the construction industry and their ability to contribute to the marketplace must be preserved.”

Generally, in order to qualify as an independent contractor under the Internal Revenue Service’s rules, the individual must be free to control the details of how he or she accomplishes the work.

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AG Becerra, Assemblymember Gonzalez Unveil Legislation to Strengthen Program to Combat CA’s Underground Economy (CA)

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Submitted by Carol A. Clark
on February 23, 2019 – 8:34am


SAN DIEGO, Feb. 22, 2019 – California Attorney General Xavier Becerra and Assemblymember Lorena Gonzalez today unveiled legislation, AB 1296, the Tax Recovery in the Underground Recovery program (TRUE Act), to combat underground economic crimes. AB 1296 is sponsored by Attorney General Becerra and was introduced by Assemblymember Lorena Gonzalez.

“With underground economic crime, our workers get exploited, business owners face unfair competition, consumers get ripped off, and taxpayers bear the burden,” said Attorney General Becerra. “AB 1296 expands on successful efforts to prosecute violators and recover funds involved in wage theft, tax evasion, counterfeit commerce and other economic crimes. The funds recovered become available to benefit cheated workers, our schools, law enforcement and our communities.”

“The underground economy hurts everyone: workers who are left without protection, consumers who are sold dangerous or fake products, and the state as we lose tax money,” said Assemblywoman Gonzalez. “This task force is a unique, collaborative approach for law enforcement to breakdown its usual silos and execute wider solutions for targeting the underground economy.”

According to a University of California at Los Angeles Labor Center report, the state’s underground economy generates between $60 to $140 billion in unreported revenue annually, depriving the state of $8.5 billion in corporate, personal, and sales and use taxes each year. TRUE’s pilot program, established in 2014, allowed agencies in Sacramento and Los Angeles to work together to investigate and prosecute the most outrageous felony-level multijurisdictional underground economic crimes in California. In September 2018, Attorney General Becerra announced the results of a year-long investigation that led to charges against a family of four for labor exploitation and human trafficking. In October 2018, Attorney General Becerra also announced that the State of California regained lost state revenues from an underground prescription drug business, from an illegal pharmaceutical scheme and from operators who possessed counterfeit merchandise intended for sale. AB 1296 builds on the success of a state pilot program by permanently establishing law enforcement teams in Sacramento and Los Angeles and authorizing additional teams in the three other major metropolitan regions of the state-San Diego, the Bay Area, and Fresno.

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Should workers report underground businesses?

Posted by National Alliance for Fair Contracting on

November 08, 2018

In addition to government, which is defrauded of tax revenue, workers are often a casualty of the underground economy. Underground businesses are not likely to expend effort to protect workers from occupational hazards, much less comply with federal and state workplace safety rules. And given that a great deal of underground employment involves physically taxing and highly hazardous work, the risk of injury and death far exceeds what is typical in a law-abiding business.

While the risk may be worth it for individuals who cannot find employment with a legitimate business, government still urges workers to report businesses that operate outside the law. For example, California’s Labor Enforcement Task Force (LETF) notes that its enforcement efforts benefit greatly from leads from the public. The LETF, in fact, lists the kind of information that makes for a good lead, and the better the information, the better the chance the lead will be investigated quickly.

$385 billion tax gap

California’s Employment Development Department (EDD) says that the term underground economy refers to “those individuals and businesses that deal in cash and/or use other schemes to conceal their activities and their true tax liability from government licensing, regulatory, and taxing agencies. Underground economy is also referred to as tax evasion, tax fraud, cash pay, tax gap, payments under-the-table, and off-the-books.”

…

OSHA

The Occupational Safety and Health Act of 1970 gives employees and their representatives the right to file a complaint and request an OSHA inspection of their workplace if they believe there is a serious hazard or their employer is not following OSHA standards. Workers do not have to know whether a specific OSHA standard has been violated to file a complaint. The complaint should be filed as soon as possible after noticing the hazard or lack of compliance because OSHA citations may only be issued for violations that currently exist or existed in the past 6 months.

“Complaints from workers or their representatives are taken seriously by OSHA,” says OSHA. “OSHA will keep your information confidential.”

A good lead

The LETF says it focuses on low-wage industries and high-hazard occupations but, regardless of the industry sector, will review all reported cases of unlawful activity and “handle each case appropriately.”

“You may remain anonymous when you make your report,” states the LETF. “However, if you leave your contact information, we can ask follow-up questions, which may determine whether we are able to investigate the lead or not.”

If there is uncertainty about whether an employer is breaking the law, the LETF says answers to the following questions will help:

  • Is the employer providing itemized statements to employees?
  • Is the employer paying minimum wage and overtime?
  • Does the employer have a valid workers’ compensation insurance policy?
  • Does the employer provide a safe working environment for employees?
  • Is the employer correctly reporting wages to the EDD and paying payroll taxes?
  • Is the employer operating with the appropriate licenses or registration?
  • Is the employer correctly classifying workers as employees versus independent contractors?

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California attorney general seeks to combat state’s growing underground economy

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by Mark Iandolo
Apr. 9, 2018, 10:44am

SACRAMENTO, Calif. (Legal Newsline) – California Attorney General Xavier Becerra announced April 2 that he is working with Sen. Cathleen Galgani on legislation to permanently establish the Tax Recovery and Criminal Enforcement (TRaCE) Task Force within the California Department of Justice.

“Here in California, home to the world’s sixth-largest economy, every worker who powers this engine deserves rights at work, every upstanding business owner deserves a fair market, and every taxpayer deserves to see their hard-earned money used to fund vital services,” Becerra said in a statement. “If you work hard and play by the rules, you should be able to get ahead. This legislation would provide the resources needed to enforce the law and protect the pocketbook of every hard working Californian.”

Senate Bill 1272 would expand TRaCE to all the state’s metropolitan regions- Sacramento, Los Angeles, San Diego, the Bay Area and Fresno. The bill seeks to combat California’s growing underground economy.

“The underground economy results in significant uncollected revenues that are desperately needed to fund basic government services,” said Galgiani in a statement. “The TRaCE Task Force, operating as a pilot program, has recovered millions of dollars in lost tax revenue for the state. I’d like to thank the agents for their rigorous work investigating and prosecuting the most egregious felony-level underground economic crimes in the state.”

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A labor voice at Harvard: ex-union leader to study the underground economy (MA)

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JULY 17, 2017
DEIRDRE FERNANDES

Mark Erlich was a familiar figure at construction sites as executive secretary of the state’s carpenters union. Now Erlich is hitting the hallowed halls of Harvard.

He’s joining the Labor and Worklife Program at Harvard Law School as a fellow. He’ll be working with professors and researchers at Harvard and other universities on issues of wages and the underground economy.

It’s a topic, he said, that is important not just for the construction industry but for the broader economy.

The research will focus on the rise of independent contractors and under-the-table compensation and how that affects public revenues, as well as identifying best practices for wage-enforcement programs.

During his 12 years heading the New England Regional Council of Carpenters, Erlich was a consistent voice against wage abuses, pushing legislators to strengthen penalties for wage theft.

Erlich said several heavy-hitters on labor issues from the Obama administration are now in the Boston area, and he hopes to work with them as they explore a changing economy in which companies rely more on contractors, rather than full-time staff.

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Immigrant workers rally in NE Portland to shed light on problems in construction industry (OR)

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Posted: Jul 28, 2017 12:34 AM EDT
Updated: Jul 28, 2017 12:34 AM EDT
By FOX 12 Staff

A group representing immigrant construction workers say they’re victims of rampant wage theft with many workers too afraid to come forward.

On Thursday the group held a rally that was organized by Portland Jobs with Justice for Immigrant Carpenters in Portland-area construction.

Workers took the podium to talk about instances of wage theft and other abuses they say they’ve experienced.

Workers say Thursday’s rally was to shed light on what they call a huge problem in Portland’s construction industry.

“Portland is under a huge construction boom right now. We got cranes all over, buildings going up left and right. But there’s an underground problem,” said Ben Besom with Northwest Carpenters Union. “It’s a really hard number to quantify because a lot of the people being exploited on these projects are afraid to come out of the shadows and tell their stories.”

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Column: Senate legislation to end wage theft epidemic

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By STAN ROSENBERG and SAL DIDOMENICO
Wednesday, October 19, 2016

The Massachusetts economy is working very, very well for some people, but not nearly well enough for others. That’s why we have one of the highest rates of income inequality in the country.

Building an economy that works for everyone is one of the top priorities of the Massachusetts Senate. We are fortunate to have thriving industries in Massachusetts, like solar energy, cyber security and pharmaceuticals. We have companies that make headlines around the world for the pioneering work they do. They pay their workers well, and they make a substantial contribution to our economy.

Less well known is a persistent underground economy, with companies that never make headlines and use that to their advantage to exploit some of our most vulnerable workers. Those companies don’t pay their workers good wages, and sometimes they even refuse to pay them for the work they do. That’s wage theft, and it’s against the law.

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Labor Enforcement Task Force (LETF)

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Learn more about LETF in California and the Underground Economy

 

The Labor Enforcement Task Force, under the direction of the Department of Industrial Relations, is a coalition of California State government enforcement agencies that work together and in partnership with local agencies to combat the underground economy. In this joint effort, information and resources are shared to ensure employees are paid properly and have safe work conditions and honest, law-abiding businesses have the opportunity for healthy competition.

RI 6-Agency Task Force Announces Establishment of Anonymous Tip Line for Allegations of Misclassification of Workers as Independent Contractors Instead of as Employees

Posted by National Alliance for Fair Contracting on

By WorkersCompensation.com

Providence, RI (WorkersCompensation.com) – A six-agency task force established to protect both workers’ rights and law-abiding businesses that classify their employees properly announced today that it has set up an anonymous telephone tip line for allegations of misclassification.

Staffed by the Rhode Island Division of Taxation, the tip line number is 401-574-8477. Also, the task force is currently building a website to allow people to post tips online.

The chairman of the Joint Task Force on the Underground Economy and Employee Misclassification, DLT Director Charles J. Fogarty, and RI Tax Administrator David M. Sullivan also announced that their agencies have been meeting regularly to share information since the task force came into being in June with the enactment of the Fiscal Year 2015 State Budget. The panel’s purpose is to:

  • coordinate joint efforts to combat fraudulent employment activities;
  • foster voluntary compliance with the law by educating workers and employers;
  • protect the health, safety and benefit rights of workers; and
  • protect law-abiding businesses from being undercut by companies that skirt the law. If warranted, an investigation may be referred to the Office of Attorney General.

 

“One of our major goals is educating, not violating, Rhode Island companies that might unknowingly be misclassifying their workers,” Fogarty said. “At the same time, however, fighting misclassification is an important strategy to promoting shared prosperity in our state